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NEW ISSUE (BOOK-ENTRY ONLY) Rating: See “RATING” herein

CITY OF BAYONNEIN THE CITY OF HUDSONSTATE OF NEW JERSEY

$27,026,000* FEDERALLY TAXABLE GENERAL IMPROVEMENT BONDS, SERIES 2020

(CALLABLE)

Dated: Date of Delivery Due: February 1, as shown on the inside front cover page

The $27,026,000* Federally Taxable General Improvement Bonds, Series 2020, (the “Federally Taxable General Improvement Bonds” or the “Bonds”), are dated their date of delivery and are general obligations of the City of Bayonne, in the County of Hudson, State of New Jersey (the “City”) and, unless payable from other sources, are payable from ad valorem taxes levied upon all the taxable property within the City for the payment of the Bonds and the interest thereon without limitation as to rate or amount. See “SECURITY AND SOURCE OF PAYMENT” herein.

The Bonds will be in fully registered book-entry only form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC, an automated depository for securities and clearing house for securities transactions, will act as securities depository for the Bonds. Individual purchases of the Bonds may be made in the principal amount of $5,000 or any integral multiple thereof, except that those Bonds in excess of the largest principal amount thereof not equaling a multiple of $5,000 shall be in denominations of $1,000 or any integral multiple thereof, through book entries made on the books and records of DTC and its participants.

The Bonds will be issued in the form of one certificate for the aggregate principal amount thereof maturing in each year and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, which will act as securities depository for the Bonds. The certificates will be on deposit with DTC. DTC will be responsible for maintaining a book-entry system for recording the interests of its participants or transfers of the interests among its participants. The participants will be responsible for maintaining records regarding the beneficial ownership interests in the Bonds on behalf of the individual purchasers. Individual purchases may be made in the principal amount of $5,000 or any integral multiple thereof, except that those Bonds in excess of the largest principal amount thereof not equaling a multiple of $5,000 shall be in denominations of $1,000 or any integral multiple thereof. See “DESCRIPTION OF THE BONDS – General Description” herein. So long as DTC or its nominee, Cede & Co., is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made to DTC or its nominee, Cede & Co., which will remit such payments to the DTC Participants, which will in turn remit such payments to the owners of beneficial interest in the Bonds. Principal of the Bonds is payable on February 1 in each of the years set forth on the inside front cover page hereof. Interest on the Bonds is payable on February 1 and August 1, commencing February 1, 2021, in each year until maturity or prior redemption, as applicable. Interest on the Bonds is calculated on the basis of twelve (12) thirty (30) day months in a three hundred sixty (360) day year.

The Bonds are subject to redemption prior to their stated maturities. See “DESCRIPTION OF THE BONDS - Optional Redemption” herein.

The Bonds are not a debt or obligation, legal, moral or otherwise, of the State of New Jersey, or any county, municipality or political subdivision thereof other than the City.

This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement, including Appendices hereto, to obtain information essential to their making an informed decision.

The Bonds are offered when, as and if issued and subject to prior sale, withdrawal or modification of the offer without notice and to the approval of legality by the law firm of Archer & Greiner P.C., Red Bank, New Jersey, Bond Counsel to the City, and certain other conditions described herein. NW Financial Group, LLC, Hoboken, New Jersey, has acted as Municipal Advisor to the City. It is expected that the Bonds will be available for delivery through the facilities of DTC, New York, New York, on or about May 11, 2020.

The Bonds will be sold on the basis of the maturity schedule set forth herein. Prospective bidders may bid on the Bonds in conformance with the applicable notice of sale for the Bonds. All Bids must be submitted in their entirety via “PARITY Electronic Bid Submission System” (PARITY) prior to 11:00 a.m., prevailing New Jersey time on April 29, 2020.

To bid, bidders must submit Good Faith Check(s) or wire transfer(s) in the amount of $540,520 for the Bonds received by the City prior to bidding.

* Preliminary, subject to change

In the opinion of Archer & Greiner P.C., Red Bank, New Jersey, Bond Counsel to the City (“Bond Counsel”), under existing statutes, regulations, rulings and court decisions, and assuming continuing compliance with certain covenants described herein, interest on the Federally Taxable General Improvement Bonds (as defined herein) is includable in gross income for Federal income tax purposes pursuant to section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Bond Counsel is further of the opinion that, under existing laws of the State of New Jersey, interest on the Federally Taxable General Improvement Bonds and any gain on the sale thereof is not includable in gross income under the New Jersey Gross Income Tax Act. See “TAX MATTERS” herein.

PRELIMINARY OFFICIAL STATEMENT DATED APRIL 22, 2020

CITY OF BAYONNE IN THE COUNTY OF HUDSON

STATE OF NEW JERSEY

MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND YIELDS

$27,026,000* FEDERALLY TAXABLE GENERAL IMPROVEMENT BONDS, SERIES 2020

Maturity February 1

Principal Amounts*

Interest Rates

Yields

CUSIPS**

2021 $750,000 2022 750,000 2023 750,000 2024 750,000 2025 750,000 2026 750,000 2027 750,000 2028 750,000 2029 750,000 2030 750,000 2031 750,000 2032 750,000 2033 750,000 2034 750,000 2035 750,000 2036 750,000 2037 750,000 2038 785,000 2039 825,000 2040 870,000 2041 915,000 2042 965,000 2043 1,020,000 2044 1,075,000 2045 1,135,000 2046 1,195,000 2047 1,260,000 2048 1,335,000 2049 1,410,000 2050 1,486,000

* Preliminary, subject to change ** CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP Numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Bonds and the City does not make any representations with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specified maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

CITY OF BAYONNE IN THE COUNTY OF HUDSON

STATE OF NEW JERSEY

MAYOR

James M. Davis

COUNCIL MEMBERS

Sharon Ashe-Nadrowski – Council President Neil Carroll, III

Salvatore Gullace Gary La Pelusa, Sr.

Juan M. Perez

CHIEF FINANCIAL OFFICER

Donna L. Mauer

CITY CLERK

Madelene C. Medina

CORPORATION COUNSEL

John F. Coffey, II, Esq. Bayonne, New Jersey

AUDITOR

Donohue, Gironda, Doria & Tomkins, LLC Bayonne, New Jersey

BOND COUNSEL

Archer & Greiner P.C. Red Bank, New Jersey

MUNICIPAL ADVISOR

NW Financial Group, LLC Hoboken, New Jersey

No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement and if given or made, such information or representation must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The presentation of information in this Official Statement is intended to show recent historic information and except as expressly stated otherwise, it is not intended to indicate future or continuing trends in the financial conditions or other affairs of the City. No representation is made that past experience, as is shown by the financial and other information, will necessarily continue or be repeated in the future. The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety. All quotations from and summaries and explanations of provisions of laws herein do not purport to be complete, and reference is made to such laws for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or an agreement between the City and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information, estimates and expressions of opinion herein are subject to change without notice. The delivery of this Official Statement or any sale of the Bonds made hereunder shall not, under any circumstances, create any indication that there has been no change in the affairs of the City with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

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TABLE OF CONTENTS DESCRIPTION PAGE INTRODUCTION .......................................................................................................................................................... 1 DESCRIPTION OF THE BONDS ................................................................................................................................. 1 AUTHORIZATION FOR THE ISSUANCE OF THE BONDS ........................................................................................ 2 PURPOSE OF BOND ISSUE AND USE OF BOND PROCEEDS ............................................................................... 2 THE DEPOSITORY TRUST COMPANY (“DTC”) INFORMATION .............................................................................. 3 PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT ............................................................ 5 DEBT INFORMATION OF THE CITY .......................................................................................................................... 7 FINANCIAL MANAGEMENT ........................................................................................................................................ 7 CAPITAL IMPROVEMENT PROGRAM ..................................................................................................................... 11 TAX ASSESSMENT AND COLLECTION .................................................................................................................. 12 TAX MATTERS .......................................................................................................................................................... 13 LEGALITY FOR INVESTMENT ................................................................................................................................. 16 RISK TO HOLDERS OF BONDS ............................................................................................................................... 16 MUNICIPAL BANKRUPTCY ...................................................................................................................................... 16 CERTIFICATES OF THE CITY .................................................................................................................................. 17 MARKET PROTECTION ............................................................................................................................................ 17 APPROVAL OF LEGAL PROCEEDINGS .................................................................................................................. 17 ADDITIONAL INFORMATION.................................................................................................................................... 18 LITIGATION ............................................................................................................................................................... 18 COMPLIANCE WITH SECONDARY MARKET DISCLOSURE REQUIREMENTS FOR THE BONDS ..................... 18 PREPARATION OF OFFICIAL STATEMENT ............................................................................................................ 18 MUNICIPAL ADVISOR .............................................................................................................................................. 19 RATING ..................................................................................................................................................................... 19 FINANCIAL STATEMENTS ....................................................................................................................................... 19 RISK FACTORS ......................................................................................................................................................... 19 MISCELLANEOUS ..................................................................................................................................................... 20 APPENDIX A - Certain Financial and Demographic Information

Concerning the City of Bayonne .................................................................................................................... A-1 APPENDIX B –Financial Statements (Unaudited for year ending 2019 and Audited for year ending 2018) ............ B-1 APPENDIX C - Form of Approving Legal Opinion for the Bonds.............................................................................. C-1 APPENDIX D - Form of Continuing Disclosure Certificate for the Bonds ................................................................. D-1

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

OFFICIAL STATEMENT

OF THE

CITY OF BAYONNE IN THE COUNTY OF HUDSON, STATE OF NEW JERSEY

RELATING TO

$27,026,000*

FEDERALLY TAXABLE GENERAL IMPROVEMENT BONDS, SERIES 2020

INTRODUCTION The purpose of this Official Statement is to provide certain information regarding the financial and economic condition of the City of Bayonne (the “City”), in the County of Hudson (the “County”), State of New Jersey (the “State”), in connection with the sale and issuance of $27,026,000* Federally Taxable General Improvement Bonds, Series 2020 (the “Federally Taxable General Improvement Bonds” or the “Bonds”). This Official Statement, which includes the cover page and the appendices attached hereto, has been prepared and compiled on behalf of the City by the Chief Financial Officer, with the assistance of Bond Counsel (as defined herein), Corporation Counsel (as defined herein) and the Auditor (as defined herein) as further described under the heading “PREPARATION OF OFFICIAL STATEMENT” herein and has been authorized by the City to be distributed in connection with the sale and issuance of the Bonds. This Official Statement contains specific information relating to the Bonds, including their general description, certain matters affecting the financing, certain legal matters, historical financial information and other information pertinent to these issues. This Official Statement should be read in its entirety. All financial and other information presented herein has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts and disbursements, is intended to show recent historical information and, but only to the extent specifically provided herein, certain projections of the immediate future, and is not necessarily indicative of future or continuing trends in the financial position or other affairs of the City.

DESCRIPTION OF THE BONDS General Description The Bonds are dated the date of delivery and shall mature in the principal amounts on February 1 in each of the years set forth in the table appearing on the inside front cover hereof. The Bonds shall bear interest at the rates shown on the inside front cover page hereof from their date of delivery, which interest shall be payable semiannually on the first day of February and August (each an “Interest Payment Date”), commencing February 1, 2021, in each year until maturity or prior redemption, as applicable. Interest on the Bonds is calculated on the basis of twelve (12) thirty (30) day months in a three hundred sixty (360) day year and will be paid by check, draft or wire transfer mailed, delivered or transmitted to the registered owners of the Bonds as of each respective January 15 and July 15 preceding an Interest Payment Date (the “Record Dates”), at the address shown on the registration books for the Bonds kept for that purpose by the Chief Financial Officer, as Registrar and Paying Agent. The Bonds, when issued, will be registered in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds (the “Securities Depository”). Purchases of beneficial interests in the Bonds will be made in book-entry only form, without certificates, in denominations of $5,000 or any integral multiple thereof, except that those Bonds in excess of the largest principal amount thereof not equaling a multiple of $5,000 shall be in

* Preliminary, subject to change

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denominations of $1,000 or any integral multiple thereof, through book entries made on the books and records of DTC and its participants. Under certain circumstances, such beneficial interests in the Bonds are exchangeable for one or more fully registered Bond certificates of like series, maturity and tenor in authorized denominations. So long as DTC or its nominee, Cede & Co., is the registered owner of the Bonds, payment of the principal of and interest on the Bonds will be made directly by the City as Paying Agent, or some other paying agent as may be designated by the City, to Cede & Co. Disbursement of such payments to the DTC Participants (as hereinafter defined) is the responsibility of DTC and disbursement of such payments to the owners of beneficial interests in the Bonds is the responsibility of the DTC Participants (as hereinafter defined). See “THE DEPOSITORY TRUST COMPANY (“DTC”) INFORMATION” herein. Optional Redemption The Bonds of this issue maturing prior to February 1, 2031 are not subject to redemption prior to their stated maturities. The Bonds of this issue maturing on or after February 1, 2031 are subject to redemption at the option of the City, in whole or in part, on any date on or after February 1, 2030. Redemption of the Bonds may proceed upon notice as required herein at one hundred percent (100%) of the principal amount being redeemed (the “Redemption Price”), plus accrued interest to the date fixed for redemption. Notice of redemption (“Notice of Redemption”) shall be given by mailing such notice at least thirty (30) days but not more than sixty (60) days before the date fixed for redemption by first class mail in a sealed envelope with postage prepaid to the registered owners of such Bonds at their respective addresses as they last appear on the registration books kept for that purpose by the City or a duly appointed Bond Registrar. So long as DTC (or any successor thereto) acts as Securities Depository for the Bonds, Notice of Redemption shall be sent to such Securities Depository and shall not be sent to the beneficial owners of the Bonds. Any failure of the Securities Depository to advise any of its participants or any failure of any participant to notify any beneficial owner of any Notice of Redemption shall not affect the validity of the redemption proceedings. If the City determines to redeem a portion of the Bonds prior to maturity, such Bonds shall be selected by the City; the Bonds to be redeemed having the same maturity shall be selected by the Securities Depository in accordance with its regulations. If Notice of Redemption has been given as provided herein, the Bonds or the portion thereof called for redemption shall be due and payable on the date fixed for redemption at the Redemption Price, together with accrued interest to the date fixed for redemption. Interest shall cease to accrue on the Bonds after the date fixed for redemption.

AUTHORIZATION FOR THE ISSUANCE OF THE BONDS The Bonds are authorized by and are issued pursuant to the Local Bond Law, N.J.S.A. 40A:2-1 et seq., as amended and supplemented (the “Local Bond Law”), a bond ordinance duly adopted by the City Council of the City on the dates set forth in the chart below and published as required by law, and by a resolution duly adopted by the City Council of the City on April 15, 2020 (the “Resolution”). The bond ordinance authorizing the Bonds was published in full or in summary, as applicable, after their final adoption along with the statement that the twenty (20) day period of limitation within which a suit, action or proceeding questioning the validity of such bond ordinances could be commenced began to run from the date of the first publication of such statement. The Local Bond Law provides, that after issuance, all obligations shall be conclusively presumed to be fully authorized and issued by all laws of the State, and all persons shall be estopped from questioning their sale, execution or delivery by the City.

PURPOSE OF BOND ISSUE AND USE OF BOND PROCEEDS

The proceeds of the Bonds will be utilized to permanently finance $27,026,000 of taxable notes of the City issued on May 24, 2019 and maturing on May 22, 2020, previously issued for the payment of certain obligations of the Bayonne Redevelopment Authority. The Bonds and the improvements or

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purposes for which the Bonds are to be issued has been authorized by a bond ordinance duly adopted by the City Council of the City on the date set forth in the following table and published as required by law: Federally Taxable General Improvement Bonds

O-13-23 Providing For The Payment Of Certain Obligations Of The Bayonne

Redevelopment Authority, Finally Adopted August 14, 2013

$27,026,000

TOTAL FEDERALLY TAXABLE GENERAL IMPROVEMENT BONDS

$27,026,000

Security and Payment for the Bonds The Bonds are valid and legally binding general obligations of the City for which the full faith and credit of the City are irrevocably pledged for the punctual payment of the principal of and interest on the Bonds. Unless otherwise paid from other sources, the City has the power and is obligated by law to levy ad valorem taxes upon all the taxable property within the City for the payment of the principal of the Bonds and the interest thereon without limitation as to rate or amount.

The City is required by law to include the total amount of principal and interest on all of its general obligation indebtedness, such as the Bonds, for the current year in each annual budget unless provision has been made for payment from other sources. The enforceability of rights or remedies with respect to the Bonds may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights or remedies heretofore or hereafter enacted. See “MUNICIPAL BANKRUPTCY” herein. The Bonds are not a debt or obligation, legal, moral or otherwise, of the State, the County or any political subdivision thereof, other than the City. No Default

There is no report of any default in the payment of the principal of, redemption premium, if any, and interest on the bonds, or other obligations of the City as of the date hereof.

THE DEPOSITORY TRUST COMPANY (“DTC”) INFORMATION

The Depository Trust Company (“DTC”), New York, New York will act as Securities Depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, as set forth on the inside front cover hereof, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing

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corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (a “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy (the “Omnibus Proxy”) to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered by the City.

http://www.dtcc.com/

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The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. THE AGENT WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR PROVIDING OF NOTICE FOR THE DTC DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE OWNERS OF THE BONDS (OTHER THAN UNDER THE CAPTION “TAX MATTERS”) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. Discontinuance of Book-Entry Only System

In the event that the book-entry-only system is discontinued and the Beneficial Owners become registered owners of the Bonds, the following provisions apply: (i) the Bonds may be exchanged for an equal aggregate principal amount of Bonds in other authorized denominations and of the same maturity, upon surrender thereof at the office of the City or Paying Agent; (ii) the transfer of any Bonds may be registered on the books maintained by the City or Paying Agent for such purposes only upon the surrender thereof to the City or Paying Agent together with the duly executed assignment in form satisfactory to the City or Paying Agent; and (iii) for every exchange or registration of transfer of Bonds, the City or Paying Agent may make a charge sufficient to reimburse for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer of the Bonds. Interest on the Bonds will be payable by check or draft, mailed on the Interest Payment Date to the registered owners thereof.

PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT

Procedure for Authorization The City has no constitutional limit on its power to incur indebtedness other than that it may issue obligations only for public purposes pursuant to State statutes. The authorization and issuance of City debt, including the purpose, amount and nature thereof, the method and manner of the incurrence of such debt, the maturity and terms of repayment thereof, and other related matters are statutory. The City is not required to submit the proposed incurrence of indebtedness to a public referendum. The City, by bond ordinance, may authorize and issue negotiable obligations for the financing of any capital improvement or property which it may lawfully acquire, or any purpose for which it is authorized or required by law to make an appropriation, except current expenses and payment of obligations (other than those for temporary financings). Bond ordinances must be finally approved by the recorded affirmative vote of at least two-thirds of the full membership of the City Council of the City. The Local Bond Law requires publication and posting of the bond ordinance or a summary thereof. If the bond ordinance requires approval or endorsement of the State, it cannot be finally adopted until such approval has been received. The Local Bond Law provides that a bond ordinance shall take effect twenty (20) days after the first publication thereof after final adoption. At the conclusion of the twenty-day period all challenges to the validity of the obligations authorized by such bond ordinance shall be precluded except for constitutional matters. Moreover, after issuance, all obligations are conclusively presumed to be fully authorized and issued by all laws of the State and any person shall be estopped from questioning their sale, execution or delivery by the City. Local Bond Law (N.J.S.A. 40A:2-1 et seq.) The Bonds are being issued pursuant to the provisions of the Local Bond Law. The Local Bond Law governs the issuance of bonds and notes to finance certain municipal capital expenditures. Among its provisions are requirements that bonds or notes must mature within the statutory period of usefulness of the

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projects being financed, that bonds be retired in either serial or sinking fund installments and that, unlike school debt, and with some exceptions, including self-liquidating obligations and those improvements involving certain State grants, a five percent (5%) cash down payment of the amount of bond and notes authorized must be generally provided. Such down payment must have been raised by budgetary appropriations, from cash on hand previously contributed for the purpose or by emergency resolution adopted pursuant to the Local Budget Law, N.J.S.A. 40A:4-1 et seq., as amended and supplemented (the “Local Budget Law”). All bonds and notes issued by the City are general “full faith and credit” obligations. Short-Term Financing Local governmental units, including counties, may issue bond anticipation notes to temporarily finance a capital improvement or project in anticipation of the issuance of bonds if the bond ordinance or subsequent resolution so provides. Such bond anticipation notes for capital improvements may be issued in an aggregate amount not exceeding the amount of bonds authorized in the ordinance, as may be amended and supplemented, creating such capital expenditure. A local unit’s bond anticipation notes may be issued and renewed for periods not exceeding one (1) year, with the final maturity occurring and being paid no later than the first day of the fifth month following the close of the tenth fiscal year after the original issuance of the notes, provided that no notes may be renewed beyond the third anniversary date of the original notes and each anniversary date thereafter unless an amount of such notes, at least equal to the first legally payable installment of the anticipated bonds (the first year’s principal payment), is paid and retired from funds other than the proceeds of obligations on or before the third anniversary date and each anniversary date thereafter. Tax anticipation notes are limited in amount by law and, in the case of the City, may be renewed from time to time, but all such Bonds and renewals thereof must mature not later than June 30 of the succeeding fiscal year. Refunding Bonds (N.J.S.A. 40A:2-51 et seq.) Refunding bonds may be issued by a local unit pursuant to the Local Bond Law for the purpose of paying, funding or refunding its outstanding bonds, including emergency appropriations, the actuarial liabilities of a non-State administered public employee pension system and amounts owing to others for taxes levied in the local unit, or any renewals or extensions thereof, and for paying the cost of issuance of refunding bonds. In certain circumstances, the Local Finance Board, in the Division of Local Government Services, New Jersey Department of Community Affairs (the “Local Finance Board”) must approve the authorization of the issuance of refunding bonds. Statutory Debt Limitation There are statutory requirements which limit the amount of debt which the City is permitted to authorize. The authorized bonded indebtedness of a City is limited by the Local Bond Law and other laws to an amount equal to two percent (2.00%) of its stated average equalized valuation basis, subject to certain exceptions noted below. N.J.S.A. 40A:2-6. The stated equalized valuation basis is set by statute as the average of the aggregate equalized valuations of all taxable real property, together with improvements to such property, and the assessed valuation of Class II railroad property within the boundaries of the City for each of the last three (3) preceding years as annually certified in the valuation of all taxable real property, in the Table of Equalized Valuations by the Director of the Division of Taxation, in the New Jersey Department of the Treasury (the “Division of Taxation”). N.J.S.A. 40A:2-2. Certain categories of debt are permitted by statute to be deducted for the purposes of computing the statutory debt limit. N.J.S.A. 40A:2-43, -44. The Local Bond Law permits the issuance of certain obligations, including obligations issued for certain emergency or self-liquidating purposes, notwithstanding the statutory debt limitation described above; but, with certain exceptions, it is then necessary to obtain the approval of the Local Finance Board. See “Exceptions to Debt Limitation - Extensions of Credit” below.

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Exceptions to Debt Limitation - Extensions of Credit (N.J.S.A. 40A:2-7) The debt limit of the City may be exceeded with the approval of the Local Finance Board. If all or any part of a proposed debt authorization is to exceed its debt limit, the City must apply to the Local Finance Board for an extension of credit. The Local Finance Board considers the request, concentrating its review on the effect of the proposed authorization on outstanding obligations and operating expenses and the anticipated ability to meet the proposed obligations. If the Local Finance Board determines that a proposed debt authorization is not unreasonable or exorbitant, that the purposes or improvements for which the obligations are issued are in the public interest and for the health, welfare and convenience or betterment of the inhabitants of the City and that the proposed debt authorization would not materially impair the credit of the City or substantially reduce the ability of the City to meet its obligations or to provide essential services that are in the public interest and makes other statutory determinations, approval is granted. In addition to the aforesaid, debt in excess of the debt limit may be issued to fund certain obligations, for self-liquidating purposes and, in each fiscal year, in an amount not exceeding two-thirds of the amount budgeted in such fiscal year for the retirement of outstanding obligations (exclusive of obligations issued for utility or assessment purposes) plus two-thirds of the amount raised in the tax levy of the current fiscal year by the local unit for the payment of bonds or Bonds of any school district. The City has not exceeded its debt limit.

DEBT INFORMATION OF THE CITY

The City must report all new authorizations of debt or changes in previously authorized debt to the Division through the filing of Supplemental and Annual Debt Statements. The Supplemental Debt Statement must be submitted to the Division before final passage of any debt authorization other than a refunding debt authorization. Before the end of the first month (January 31) of each fiscal year of the City, the City must file an Annual Debt Statement which is dated as of the last day of the preceding fiscal year (December 31) with the Division and with the City Clerk. This report is made under oath and states the authorized, issued and unissued debt of the City as of the previous December 31. Through the Annual and Supplemental Debt Statements, the Division monitors all local borrowing. Even though the City's authorizations are within its debt limits, the Division is able to enforce State regulations as to the amounts and purposes of local borrowings.

FINANCIAL MANAGEMENT Accounting and Reporting Practices The accounting policies of the City conform to the accounting principles applicable to local governmental units which have been prescribed by the Division. A modified accrual basis of accounting is followed with minor exceptions. Revenues are recorded as received in cash except for certain amounts which may be due from other governmental units and which are accrued. Receivables for property taxes are recorded with offsetting reserves on the balance sheet of the City's Current Fund; accordingly, such amounts are not recorded as revenue until collected. Other amounts that are due to the City which are susceptible to accrual are also recorded as receivables with offsetting reserves and recorded as revenue only when received. Expenditures are generally recorded on the accrual basis, except that unexpended appropriations at December 31, unless canceled by the governing body, are reported as expenditures with offsetting appropriation reserves. Appropriation reserves are available, until lapsed at the close of the succeeding fiscal year, to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Lapsed appropriation reserves are credited to the results of operations. As is the prevailing practice among municipalities and counties in the State, the City does not record obligations for accumulated unused vacation and sick pay. Local Budget Law (N.J.S.A. 40A:4-1 et seq.) The foundation of the State local finance system is the annual cash basis budget. Every local unit, including the City, must adopt an annual operating budget in the form required by the Division. Certain items of revenue and appropriation are regulated by law and the proposed operating budget cannot be finally adopted until it has been certified by the Director, or in the case of a local unit’s examination of its own budget as described herein, such budget cannot be finally adopted until a local examination certificate has

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been approved by the Chief Financial Officer and governing body of the local unit. The Local Budget Law requires each local unit to appropriate sufficient funds for payment of current debt service and the Director, or in the case of the local examination, the local unit may review the adequacy of such appropriations. Among other restrictions, the Director or, in the case of local examination, the local unit may examine the budget with reference to all estimates of revenue and the following appropriations: (a) payment of interest and debt redemption charges, (b) deferred charges and statutory expenditures, (c) cash deficit of the preceding year, (d) reserve for uncollected taxes, and (e) other reserves and non-disbursement items. Taxes levied are a product of total appropriations, less non-tax revenues, plus a reserve predicated on the prior year's collection experience. The Director, in reviewing the budget, has no authority over individual operating appropriations, unless a specific amount is required by law, but the Director’s budgetary review functions, focusing on anticipated revenues, and serves to protect the solvency of the local unit. Local budgets, by law and regulation, must be in balance on a "cash basis", i.e., the total of anticipated revenues must equal the total of appropriation. N.J.S.A. 40A:4-22. If in any year the City's expenditures exceed its realized revenues for that year, then such excess (deficit) must be raised in the succeeding year's budget. In accordance with the Local Budget Law and related regulations, (i) each local unit, with a population of 10,000 persons, must adopt and annually revise a six (6) year capital program (ii) each local unit, with a population under 10,000 persons, must adopt (with some exceptions) and annually revise a three (3) year capital program. See "CAPITAL IMPROVEMENT PROGRAM" herein. Municipal public utilities are supported by the revenues generated by the respective operations of the utilities, in addition to the general taxing power upon real property. For each utility, there is established a separate budget. The anticipated revenues and appropriations for each utility are set forth in the separate section of the budget. The budget is required to be balanced and to provide fully for debt service. The regulations regarding anticipation of revenues and deferral of charges apply equally to the budgets of the utilities. Deficits or anticipated deficits in utility operations which cannot be provided for from utility surplus, if any, are required to be raised in the “current” or operating budget. State Supervision (N.J.S.A. 52:27BB-1 et seq.) State law authorizes State officials to supervise fiscal administration in any municipality which is in default on its obligations; which experiences severe tax collection problems for two (2) successive years; which has a deficit greater than four percent (4%) of its tax levy for two (2) successive years; which has failed to make payments due and owing to the State, county, school district or special district for two (2) consecutive years; which has an appropriation in its annual budget for the liquidation of debt which exceeds twenty-five percent (25%) of its total operating appropriations (except dedicated revenue appropriations) for the previous budget year; or which has been subject to a judicial determination of gross failure to comply with the Local Bond Law, the Local Budget Law or the Local Fiscal Affairs Law which substantially jeopardizes its fiscal integrity. State officials are authorized to continue such supervision for as long as any of the conditions exist and until the municipality operates for a fiscal year without incurring cash deficit. Limitations on Expenditures ("Cap Law") (N.J.S.A. 40A:4-45.1, et seq.)

N.J.S.A. 40A:4-45.3 places limits on municipal tax levies and expenditures. This law is commonly known as the “Cap Law” (the “Cap Law”). The Cap Law provides that the City shall limit any increase in its budget to 2.5% or the Cost-Of-Living Adjustment, whichever is less, of the previous year’s final appropriations, subject to certain exceptions. The Cost-Of-Living Adjustment is defined as the rate of annual percentage increase, rounded to nearest half percent, in the Implicit Price Deflator for State and Local Government Purchases of Goods and Services produced by the United States Department of Commerce for the year preceding the current year as announced by the Director. However, in each year in which the Cost-Of-Living Adjustment is equal to or less than 2.5%, the City may, by ordinance, approved by a majority vote of the full membership of the governing body, provide that the final appropriations of the City for such year be increased by a percentage rate that is greater than the Cost-Of-Living Adjustment, but not more than 3.5% over the previous year’s final appropriations. See N.J.S.A. 40A:4-45.14. In addition,

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N.J.S.A. 40A:4-45.15a restored “CAP” banking to the Local Budget Law. Municipalities are permitted to appropriate available “CAP Bank” in either of the next two (2) succeeding years’ final appropriations. Along with the permitted increases for total general appropriations there are certain items that are allowed to increase outside the “CAP”.

Additionally, P.L. 2010, c.44 imposes a 2% cap on the tax levy of a municipality, county, fire district or solid waste collection district, with certain exceptions and subject to a number of adjustments. The exclusions from the limit include increases required to be raised for capital expenditures, including debt service, increases in pension contributions in excess of 2%, certain increases in health care costs in excess of 2%, and extraordinary costs incurred by a local unit directly related to a declared emergency. The governing body of a local unit may request approval, through a public question submitted to the legal voters residing in its territory, to increase the amount to be raised by taxation, and voters may approve increases above 2% not otherwise permitted under the law by an affirmative vote of 50%. The Division of Local Government Services has advised that counties and municipalities must comply with both budget “CAP” and the tax levy limitation. Neither the tax levy limitation nor the “CAP” law, however, limits the obligation of the City to levy ad valorem taxes upon all taxable property within the boundaries of the City to pay debt service on bonds and notes, including the Bonds. Deferral of Current Expenses Supplemental appropriations made after the adoption of the budget and determination of the tax rate may be authorized by the governing body of a local unit, including the City, but only to meet unforeseen circumstances, to protect or promote public health, safety, morals or welfare, or to provide temporary housing or public assistance prior to the next succeeding fiscal year. However, with certain exceptions described below, such appropriations must be included in full as a deferred charge in the following year's budget. Any emergency appropriation must be declared by resolution according to the definition provided in N.J.S.A. 40A:4-48, and approved by at least two-thirds of the full membership of the governing body and shall be filed with the Director. If such emergency appropriations exceed three percent (3%) of the adopted operating budget, consent of the Director is required. N.J.S.A. 40A:4-49. The exceptions are certain enumerated quasi-capital projects (“special emergencies”) such as (i) the repair and reconstruction of streets, roads or bridges damaged by snow, ice, frost, or floods, which may be amortized over three (3) years, and (ii) the repair and reconstruction of streets, roads, bridges or other public property damaged by flood or hurricane, where such expense was unforeseen at the time of budget adoption, the repair and reconstruction of private property damaged by flood or hurricane, tax map preparation, re-evaluation programs, revision and codification of ordinances, master plan preparations, drainage map preparation for flood control purposes, studies and planning associated with the construction and installation of sanitary sewers, authorized expenses of a consolidated commission, contractually required severance liabilities resulting from the layoff or retirement of employees and the preparation of sanitary and storm system maps, all of which projects set forth in this section (ii) may be amortized over five (5) years. N.J.S.A. 40A:4-53, -54, -55, -55.1. Emergency appropriations for capital projects may be financed through the adoption of a bond ordinance and amortized over the useful life of the project as described above. Budget Transfers Budget transfers provide a degree of flexibility and afford a control mechanism. Pursuant to N.J.S.A. 40A:4-58, transfers between major appropriation accounts are prohibited until the last two (2) months of the municipality’s fiscal year. Appropriation reserves may be transferred during the first three (3) months of the current fiscal year to the previous fiscal year's budget. N.J.S.A. 40A:4-59. Both types of transfers require a two-thirds vote of the full membership of the governing body. Although sub-accounts within an appropriation are not subject to the same year-end transfer restriction, they are subject to internal review and approval. Generally, transfers cannot be made from the down payment account, the capital improvement fund, contingent expenses or from other sources as provided in the statute.

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Anticipation of Real Estate Taxes The same general principle that revenue cannot be anticipated in a budget in excess of that realized in the preceding year applies to property taxes. N.J.S.A 40A:4-29 sets limits on the anticipation of delinquent tax collections and provides that, "[t]he maximum which may be anticipated is the sum produced by the multiplication of the amount of delinquent taxes unpaid and owing to the local unit on the first day of the current fiscal year by the percentage of collection of delinquent taxes for the year immediately preceding the current fiscal year." In regard to current taxes, N.J.S.A. 40A:4-41(b) provides that, "[r]eceipts from the collection of taxes levied or to be levied in the municipality, or in the case of a county for general county purposes and payable in the fiscal year shall be anticipated in an amount which is not in excess of the percentage of taxes levied and payable during the next preceding fiscal year which was received in cash by the last day of the preceding fiscal year." This provision requires that an additional amount (the "reserve for uncollected taxes") be added to the tax levy required to balance the budget so that when the percentage of the prior year's tax collection is applied to the combined total, the sum will at least equal the tax levy required to balance the budget. The reserve requirement is calculated as follows: Total of Local, County, and School Levies

- Anticipated Revenues = Cash Required from Taxes to Support Local Municipal Budget and Other Taxes

Cash Required from Taxes to Support Local Municipal Budget and Other Taxes

= Amount to be Raised by Taxation Prior Year’s Percentage of Current Tax Collection (or Lesser %)

Anticipation of Miscellaneous Revenues N.J.S.A 40A:4-26 provides that, "[n]o miscellaneous revenues from any source shall be included as an anticipated revenue in the budget in an amount in excess of the amount actually realized in cash from the same source during the next preceding fiscal year, unless the director shall determine upon application by the governing body that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and shall certify such determination, in writing, to the local unit." No budget or amendment thereof shall be adopted unless the Director shall have previously certified his approval of such anticipated revenues except that categorical grants-in-aid contracts may be included for their face amount with an offsetting appropriation. The fiscal years of such grants rarely coincide with a municipality's calendar fiscal year. Grant revenues are fully realized in the year in which they are budgeted by the establishment of accounts receivable and offsetting reserves. Local Examination of Budgets (N.J.S.A. 40A:4-78(b)) Chapter 113 of the Laws of New Jersey of 1996 (N.J.S.A. 40A:4-78(b)) authorizes the Local Finance Board to adopt rules that permit certain municipalities to assume the responsibility, normally granted to the Director, of conducting the annual budget examination required by the Local Budget Law. Since 1997 the Local Finance Board has developed regulations that allow “eligible” and “qualifying” municipalities to locally examine their budget every two (2) of three (3) years. Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.) The Local Fiscal Affairs, N.J.S.A. 40A:5-1 et seq., as amended and supplemented (the “Local Fiscal Affairs Law”), regulates the non-budgetary financial activities of local governments. An annual, independent audit of the local unit's accounts for the previous year must be performed by a Registered Municipal Accountant licensed in the State of New Jersey. The audit, conforming to the Division of Local Government Services, in the New Jersey Department of Community Affairs (the "Division") "Requirements of Audit", must be completed within six (6) months (June 30) after the close of the City's fiscal year (December 31), includes

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recommendations for improvement of the local unit's financial procedures. The audit report must be filed with the City Clerk and is available for review during regular municipal business hours and shall, within five (5) days thereafter be filed with the Director of the Division (the "Director"). A synopsis of the audit report, together with all recommendations made, must be published in a local newspaper within thirty (30) days of the City Clerk’s receipt of the audit report. Accounting methods utilized in the conduct of the audit conform to practices prescribed by the Division, which practices differ in some respects from generally accepted accounting principals. Annual Financial Statement (N.J.S.A. 40A:5-12 et seq.) An annual financial statement (“Annual Financial Statement”) which sets forth the financial condition of a local unit for the fiscal year must be filed with the Division not later than January 26 (in the case of a county) and not later than February 10 (in the case of a municipality) after the close of the calendar fiscal year, such as the City, or not later than August 10 of the State fiscal year for those municipalities which operate on the State fiscal year. The Annual Financial Statement is prepared either by the Chief Financial Officer or the Registered Municipal Accountant for the local unit. It reflects the results of operations for the year of the Current and Utility Funds. If the statement of operations results in a cash deficit, the deficit must be included in full in the succeeding year's budget. The entire annual audit report is filed with the clerk of the local unit and is available for review during business hours. Investment of Municipal Funds Investment of funds by municipalities is governed by N.J.S.A. 40A:5-14 et seq. Such statute requires municipalities to adopt a cash management plan pursuant to the requirements outlined by said statute. Once a municipality adopts a cash management plan it must deposit or invest its funds pursuant to such plan. N.J.S.A. 40A:5-15.1 provides for the permitted securities a municipality may invest in pursuant to its cash management plan. Some of the permitted securities are as follows: (a) obligations of, or obligations guaranteed by, the United States of America (“Government Obligations”), (b) Government money market mutual funds which invest in securities permitted under the statute, (c) bonds of certain Federal Government agencies having a maturity date not greater than 397 days from the date of purchase, (d) bonds or other obligations of the particular municipality or school districts of which the local unit is a part or within which the school district is located, and (e) bonds or other obligations having a maturity date not greater than 397 days from the date of purchase and approved by the Division of Investment, in the New Jersey Department of the Treasury. Municipalities are required to deposit their funds in banks satisfying certain security requirements set forth in N.J.S.A. 17:9-41 et seq. Municipalities are required to deposit their funds in interest-bearing bank accounts to the extent practicable and other permitted investments.

CAPITAL IMPROVEMENT PROGRAM In accordance with the Local Budget Law, the City must adopt and may from time to time amend rules and regulations for capital budgets, which rules and regulations must require a statement of capital undertakings underway or projected for a period not greater than over the next ensuing six (6) years as a general improvement program. The Capital Budget and Capital Improvement Program must be adopted as part of the annual budget pursuant to N.J.A.C. 5:30-4. The Capital Budget does not by itself confer any authorization to raise or expend funds, rather it is a document used for planning. Specific authorization to expend funds for such purposes must be granted, by a separate bond ordinance, by inclusion of a line item in the Capital Improvement Section of the budget, by an ordinance taking money from the Capital Improvement Fund, or other lawful means.

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TAX ASSESSMENT AND COLLECTION Assessment and Collection of Taxes Property valuations (assessments) are determined on true values as arrived at by the cost approach, market data approach and capitalization of net income (where applicable). Current assessments are the result of maintaining new assessments on a “like” basis with established comparable properties for newly assessed or purchased properties resulting in a decline of the assessment ratio to true value to its present level. This method assures equitable treatment to like property owners. Because of the escalation of property resale values, annual adjustments could not keep pace with the rising values. Upon the filing of certified adopted budgets by the City, the local school district and the County, the tax rate is struck by the County Board of Taxation based on the certified amounts in each of the taxing districts for collection to fund the budgets. The statutory provisions for the assessment of property, levying of taxes and the collection thereof are set forth in N.J.S.A. 54:4-1 et seq. Special taxing districts are permitted in New Jersey for various special services rendered to the properties located within the special district. For calendar year municipalities, tax bills are sent in June of the current fiscal year. Taxes are payable in four quarterly installments on February 1, May 1, August 1 and November 1. The August and November tax bills are determined as the full tax levied for municipal, county and school purposes for the current municipal fiscal year, less the amount charged as the February and May installments for municipal, county and school purposes in the current fiscal year. The amounts due for the February and May installments are determined as by the municipal governing body as either one-quarter or one-half of the full tax levied for municipal, county of school purposes for the preceding fiscal year. Fiscal year municipalities follow the same general rationale for the billing of property taxes, however billing is processed semi-annually. The provisions of P.L. 1994, C. 72 changed the procedures for State fiscal year billing originally established in P.L. 1991, C. 75. Chapter 72 moves the billing calculation back on a calendar year basis, which permits tax levies to be proved more readily than before. The formula used to calculate tax bills under P.L. 1994, C. 72 are as follows: The third and fourth installments, for municipal purposes, would equal one-half of an estimated annual tax levy, plus the balance of the full tax levied during the current tax year for school, county and special district purposes. The balance of the full tax for non-municipal purposes is calculated by subtracting amounts due on a preliminary basis from the full tax requirement for the tax year. The first and second installments, for municipal purposes, will be calculated on a percentage of the previous years billing necessary to bill the amount required to collect the full tax levy, plus the non-municipal portion, which represents the amount payable to each taxing district for the period of January 1 through June 30. Tax installments not paid on or before the due date are subject to interest penalties of eight percent (8%) on the first $1,500 of the delinquency and, then eighteen percent (18%) per annum on any amount in excess of $1,500. A penalty of up to six percent (6%) of the delinquency in excess of $10,000 may be imposed on a taxpayer who fails to pay that delinquency prior to the end of the tax year in which the taxes become delinquent. Delinquent taxes open for one year or more are annually included in a tax sale in accordance with State Statutes. Tax title liens are periodically assigned to the Director of Law (as defined herein) for in rem foreclosures in order to acquire title to these properties. The provisions of chapter 99 of the Laws of New Jersey of 1997 allow a municipality to sell its total property tax levy to the highest bidder either by public sale with sealed bids or by public auction. The purchaser shall pay the total property tax levy bid amount in quarterly installments or in one annual installment. Property taxes will continue to be collected by the municipal tax collector and the purchaser will receive as a credit against his payment obligation the amount of taxes paid to the tax collector. The purchaser is required to secure his payment obligation to the municipality by an irrevocable letter of credit or surety bond. The purchaser is entitled to receive, all delinquent taxes and other municipal charges

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owing, due and payable upon collection by the tax collector. The statute sets forth bidding procedures, minimum bidding terms and requires the review and approval of the sale by the Division. Tax Appeals New Jersey Statutes provide a taxpayer with remedial procedures for appealing an assessed valuation that the taxpayer deems excessive. The taxpayer has a right to file a petition on or before the 1st day of April of the current tax year for its review. The County Board of Taxation and the Tax Court of New Jersey have the authority after a hearing to increase, decrease or reject the appeal petition. Adjustments by the County Board of Taxation are usually concluded within the current tax year and reductions are shown as cancelled or remitted taxes for that year. If the taxpayer believes the decision of the County Board of Taxation to be incorrect, appeal of the decision may be made to the Tax Court of New Jersey. State tax court appeals tend to take several years to conclude by settlement or trial and any losses in tax collection from prior years, after an unsuccessful trial or by settlement, are charged directly to operations.

TAX MATTERS

In the opinion of Bond Counsel, interest on the Bonds is includable in gross income for federal income tax purposes.

The following is a summary of certain United States federal income tax consequences of the

ownership of the Bonds as of the date hereof. Each prospective investor should consult with its own tax advisor regarding the application of United States federal income tax laws, as well as any state, local, foreign or other tax laws, to its particular situation.

This summary is based on the Code, as well as Treasury Regulations and administrative and judicial rulings and practice. Legislative, judicial and administrative changes may occur, possibly with retroactive effect, that could alter or modify the continued validity of the statements and conclusions set forth herein. This summary is intended as a general explanatory discussion of the consequences of holding the Bonds generally and does not purport to furnish information in the level of detail or with the investor’s specific tax circumstances that would be provided by an investor’s own tax advisor. For example, this summary is addressed only to original purchasers of the Bonds that are "U.S. holders" (as defined below), deals only with the Bonds held as a capital asset within the meaning of Section 1221 of the Code and does not address tax consequences to holders that may be relevant to investors subject to special rules. In addition, this summary does not address alternative minimum tax issues or the indirect consequences to a holder of an equity interest in the Bonds.

As used herein, a "U.S. holder" is a "U.S. person" that is a beneficial owner of the Bonds. A "non-U.S. investor" is a holder (or beneficial owner) of the Bonds that is not a U.S. person. For these purposes, a "U.S. person" is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof (except, in the case of a partnership, to the extent otherwise provided in Treasury Regulations), an estate the income of which is subject to United States federal income taxation regardless of its source or a trust if (i) a United States court is able to exercise primary supervision over the trust’s administration, and (ii) one or more U.S. persons have the authority to control all of the trust’s substantial decisions.

Sale or Redemption of the Bonds

A Bond owner’s tax basis for the Bonds is the price such owner pays for the Bonds plus amounts of any original issue discount included in income, reduced on account of any payments received (other than "qualified periodic interest" payments) and any amortized premium. Gain or loss recognized on a sale, exchange or redemption of the Bonds, measured by the difference between the amount realized and the Bonds’ basis as so adjusted, will generally give rise to capital gain or loss if the Bonds is held as a capital asset.

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Possible Recognition of Taxable Gain or Loss Upon Defeasance of Bonds

Defeasance of any Bonds may result in a deemed exchange under Section 1001 of the Code, in which event the holder of such Bonds will recognize taxable gain or loss in an amount equal to the difference between the amount realized from the deemed exchange (less any accrued qualified stated interest which will be taxable as such) and the holder’s adjusted basis in such Bonds.

Backup Withholding

A bondowner may, under certain circumstances, be subject to "backup withholding" (currently the rate of this withholding tax is 28%, but may change in the future) with respect to interest or original issue discount on the Bonds. This withholding generally applies if the owner of the Bonds (a) fails to furnish the City or its paying agent with its taxpayer identification number; (b) furnishes the City or its paying agent with an incorrect taxpayer identification number; (c) fails to report properly interest, dividends or other "reportable payments" as defined in the Code; or (d) under certain circumstances, fails to provide the City or its paying agent with a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is its correct number and that the holder is not subject to backup withholding. Backup withholding will not apply, however, with respect to certain payments made to bondowners, including payments to certain exempt recipients (such as certain exempt organizations) and to certain Nonresidents (as defined below). Owners of the Bonds should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining the exemption.

The amount of "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to payments on the Bonds will be reported to the bondowners and to the IRS.

Foreign Bond Owners

Under the Code, interest and original issue discount income with respect to the Bonds held by nonresident alien individuals, foreign corporations or other non-United States persons ("Nonresidents") generally will not be subject to the United States withholding tax (or backup withholding) if the City or the Paying Agent (or other person who would otherwise be required to withhold tax from such payments) is provided with an appropriate statement that the beneficial owner of the Bonds is a Nonresident. The withholding tax may be reduced or eliminated by an applicable tax treaty, if any. Notwithstanding the foregoing, if any such payments are effectively connected with a United States trade or business conducted by a Nonresident Bond owner, they will be subject to regular United States income tax, but will ordinarily be exempt from United States withholding tax.

ERISA

The Employees Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA (an "ERISA Plan") and persons who, with respect to that plan, are fiduciaries or other "parties in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Code. All fiduciaries of ERISA Plans, in consultation with their advisors, should carefully consider the impact of ERISA and the Code on an investment in the Bonds.

In all events, all investors should consult their own tax advisors in determining the federal, state, local and other tax consequences to them of the purchase, ownership and disposition of the Bonds.

State Taxation

Bond Counsel is of the opinion that, based upon existing law, interest on the Bonds and any gain on the sale thereof are not included in gross income under the New Jersey Gross Income Tax Act.

THE OPINIONS EXPRESSED BY BOND COUNSEL WITH RESPECT TO THE BONDS ARE BASED UPON EXISTING LAWS AND REGULATIONS AS INTERPRETED BY RELEVANT

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JUDICIAL AND REGULATORY CHANGES AS OF THE DATE OF ISSUANCE OF THE BONDS, AND BOND COUNSEL HAS EXPRESSED NO OPINION WITH RESPECT TO ANY LEGISLATION, REGULATORY CHANGES OR LITIGATION ENACTED, ADOPTED OR DECIDED SUBSEQUENT THERETO.

PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE POTENTIAL IMPACT OF ANY PENDING OR PROPOSED FEDERAL OR STATE TAX LEGISLATION, REGULATIONS OR LITIGATION.

ADDITIONALLY, EACH PURCHASER OF THE BONDS SHOULD CONSULT HIS OR HER

OWN ADVISOR REGARDING ANY CHANGES IN THE STATUS OF PENDING OR PROPOSED FEDERAL OR NEW JERSEY STATE TAX LEGISLATION, ADMINISTRATIVE ACTION TAKEN BY TAX AUTHORITIES, OR COURT DECISIONS. ALL POTENTIAL PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE CODE. Proposals for Legislative Change

From time to time, there are Presidential proposals, proposals of various Federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the Federal and state tax matters referred to herein or adversely affect the marketability or market value of the Bonds or otherwise prevent holders of the Bonds from realizing, if applicable, the full benefit of the tax status of owning the Bonds. Further, such proposals may impact the marketability or market value of the Bonds simply by being proposed. Such legislation could adversely impact the marketability and market value of the Bonds and prevent certain bondholders (depending on the financial and tax circumstances of the particular noteholder) from realizing, if applicable, the full benefit of the tax status of owning the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to Bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds would be impacted thereby.

Each Purchaser of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The disclosures and opinions expressed herein are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and no opinion is expressed as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation.

Other Tax Consequences Except as described above, Bond Counsel expresses no opinion with respect to any Federal, state, local or foreign tax consequences of ownership of the Bonds. Bond Counsel renders its opinion under existing statutes, regulations, rulings and court decisions as of the date of issuance of the Bonds and assumes no obligation to update its opinion after such date of issuance to reflect any future action, fact, circumstance, change in law or interpretation, or otherwise. Bond Counsel expresses no opinion as to the effect, if any, on the tax status of the interest on the Bonds paid or to be paid as a result of any action hereafter taken or not taken in reliance upon an opinion of other counsel.

See Appendix C for the complete text of the proposed form of Bond Counsel’s legal opinion with respect to the Bonds. ALL POTENTIAL PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES (INCLUDING BUT NOT LIMITED TO THOSE LISTED ABOVE) OF THE OWNERSHIP OF THE BONDS.

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LEGALITY FOR INVESTMENT The State and all public officers, municipalities, counties, political subdivisions and public bodies, and agencies thereof, all banks, bankers, trust companies, savings and loan associations, savings banks and institutional, building and loan associations, investment companies, and other persons carrying on banking business, all insurance companies, and all executors, administrators, guardians, trustees, and other fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any obligations of the City, including the Bonds, and such Bonds are authorized security for any and all public deposits.

RISK TO HOLDERS OF BONDS It is understood that the rights of the holders of the Bonds, and the enforceability thereof, may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

MUNICIPAL BANKRUPTCY THE CITY HAS NOT AUTHORIZED THE FILING OF A BANKRUPTCY PETITION. THIS REFERENCE TO THE BANKRUPTCY CODE OR THE STATE STATUTE SHOULD NOT CREATE ANY IMPLICATION THAT THE CITY EXPECTS TO UTILIZE THE BENEFITS OF THEIR PROVISIONS, OR THAT IF UTILIZED, SUCH ACTION WOULD BE APPROVED BY THE LOCAL FINANCE BOARD, OR THAT ANY PROPOSED PLAN WOULD INCLUDE A DILUTION OF THE SOURCE OF PAYMENT OF AND SECURITY FOR THE BONDS, OR THAT THE BANKRUPTCY CODE COULD NOT BE AMENDED AFTER THE DATE HEREOF. The undertakings of the City should be considered with reference to 11 U.S.C. §101 et seq., as amended and supplemented (the "Bankruptcy Code"), and other bankruptcy laws affecting creditors' rights and municipalities in general. The Bankruptcy Code permits the State or any political subdivision, public agency, or instrumentality that is insolvent or unable to meet its debts to commence a voluntary bankruptcy case by filing a petition with a bankruptcy court for the purpose of effecting a plan to adjust its debts; directs such a petitioner to file with the court a list of petitioner's creditors; provides that a petition filed under this chapter shall operate as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner; grants priority to certain debts owed, and provides that the plan must be accepted in writing by or on behalf of creditors holding at least two-thirds in amount and more than one half in number of the allowed claims of at least one (1) impaired class. The Bankruptcy Code specifically does not limit or impair the power of a state to control by legislation or otherwise, the procedures that a municipality must follow in order to take advantage of the provisions of the Bankruptcy Code. The Bankruptcy Code provides that special revenue acquired by the debtor after the commencement of the case shall remain subject to any lien resulting from any security agreement entered into by such debtor before the commencement of such bankruptcy case. However, special revenues acquired by the debtor after commencement of the case shall continue to be available to pay debt service secured by those revenues. Furthermore, the Bankruptcy Code provided that a transfer of property of a debtor to or for the benefit of any holder of a bond or note, on account of such bond or note, may be avoided pursuant to certain preferential transfer provisions set forth in such act. Reference should also be made to N.J.S.A. 52:27-40 et seq. which provides that a local unit, including the City, has the power to file a petition in bankruptcy with any United States Court or court in bankruptcy under the provisions of the Bankruptcy Code, for the purpose of effecting a plan of readjustment of its debts or for the composition of its debts; provided, however, the approval of the Local Finance Board, as successor to the Municipal Finance Commission, must be obtained. .

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Remedies of Holders of Bonds (N.J.S.A. 52:27-1 et seq.) If the City defaults for over sixty (60) days in the payment of the principal of or interest on any bonds or Bonds outstanding, any holder of such bonds or Bonds may bring an action against the City in the Superior Court of New Jersey (the “Superior Court”) to obtain a judgment that the City is so in default. Once a judgment is entered by the Superior Court to the effect that the City is in default, the Municipal Finance Commission (the “Commission”) would become operative in the City. The Commission was created in 1931 to assist in the financial rehabilitation of municipalities which were in default in their obligations. The powers and duties of the Commission are exercised within the Division, which constitutes the Commission. The Commission exercises direct supervision over the finances and accounts of any municipality which has been adjudged by the Superior Court to be in default of its obligations. The Commission continues in force in such municipalities until all bonds, Bonds or other indebtedness of the municipality which have fallen due, and all bonds or Bonds which will fall due within one (1) year (except tax anticipation or revenue anticipation Bonds), and the interest thereon, have been paid, funded or refunded, or the payment thereof has been adequately provided for by a cash reserve, at which time the Commission’s authority over such municipality ceases. The Commission is authorized to supervise tax collections and assessments, to approve the funding or refunding of bonds, Bonds or other indebtedness of the municipality which the Commission has found to be outstanding and unpaid, and to approve the adjustment or composition of claims of creditors and the readjustment of debts under the Bankruptcy Code.

CERTIFICATES OF THE CITY Upon the delivery of the Bonds, the original purchaser or purchasers shall receive a certificate, in form satisfactory to Bond Counsel and signed by officials of the City, stating to the best knowledge of said officials, that this Official Statement as of its date did not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and stating, to the best knowledge of said officials, that there has been no material adverse change in the condition, financial or otherwise, of the City from that set forth in or contemplated by this Official Statement. In addition, the respective original purchaser or purchasers of the Bonds shall also receive certificates in form satisfactory to Bond Counsel evidencing the proper execution and delivery of the Bonds and receipt of payment therefor, and a certificate dated as of the date of the delivery of the Bonds, and signed by the officers who signed the Bonds, stating that no litigation is then pending or, to the knowledge of such officers, threatened to restrain or enjoin the issuance or delivery of the Bonds or the levy or collection of taxes to pay the Bonds, as applicable, or the interest thereon, or questioning the validity of the statutes or the proceedings under which the Bonds, as applicable, are issued, and that neither the corporate existence or boundaries of the City, nor the title of any of the said officers to the respective offices, is being contested.

MARKET PROTECTION The City will close on $3,475,000 Tax-Exempt Bond Anticipation Notes that will be issued through the Hudson County Improvement Authority on May 12, 2020. Additionally, the City may issue approximately $68,370,000 in Qualified General Improvement Refunding Bonds, Series 2020 (the “2020 Refunding Bonds”) prior to the end of calendar year 2020. The 2020 Refunding Bonds would be issued to refund all of the City’s callable Qualified General Improvement Bonds, Series 2016, dated April 19, 2016.

APPROVAL OF LEGAL PROCEEDINGS

All legal matters incident to the authorization, the issuance, the sale and the delivery of the Bonds are subject to the approval of Bond Counsel, whose approving legal opinion(s) with respect to the Bonds will be delivered with the Bonds substantially in the form set forth in Appendix C attached hereto. Certain legal matters with respect to the Bonds will be passed on for the City by its Corporation Counsel, John F. Coffey, II, Esq., Bayonne, New Jersey (“Corporation Counsel”).

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ADDITIONAL INFORMATION Inquiries regarding this Official Statement, including information additional to that contained herein, may be directed to Donna L. Mauer, Chief Financial Officer, City of Bayonne, 630 Avenue C, Bayonne, New Jersey 07002, or by telephone at (201) 858-6043 or by email at [email protected]; or City Bond Counsel, John M. Cantalupo, Esq., Archer & Greiner P.C., 10 Highway 35, Red Bank, New Jersey 07701, or by telephone at (732) 268-8009 or by email at [email protected]; or City Municipal Advisor, Timothy S. Eismeier, NW Financial Group, LLC, 2 Hudson Place, Hoboken, New Jersey 07030, or by telephone at (201) 656-0115 or by email at [email protected].

LITIGATION To the knowledge of Corporation Counsel, after due inquiry, there is no litigation of any nature now pending or threatened, restraining or enjoining the issuance or the delivery of the Bonds, or the levy or the collection of any taxes to pay the principal of or the interest on the Bonds, or in any manner questioning the authority or the proceedings for the issuance of the Bonds or for the levy or the collection of taxes, or contesting the corporate existence or the boundaries of the City or the title of any of the present officers. Further, to the knowledge of the Corporation Counsel, no litigation is presently pending or threatened that, in the opinion of the Corporation Counsel, would have a material adverse impact on the financial condition of the City if adversely decided.

COMPLIANCE WITH SECONDARY MARKET DISCLOSURE REQUIREMENTS FOR THE BONDS

The City has covenanted for the benefit of bondholders to provide certain financial information and operating data on the City by no later than September 30 of each year, commencing September 30, 2019 and to comply with the provisions of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended and supplemented, and as detailed in a Continuing Disclosure Certificate (the “Bond Certificate”) to be executed on behalf of the City by its Chief Financial Officer, in the form appearing in Appendix D hereto, such Bond Certificate to be delivered concurrently with the delivery of the Bonds. This covenant is being made by the City to assist the Underwriter of the Bonds in complying with the Rule.

Over the past five (5) years, the City of Bayonne has failed to comply with its prior undertakings to provide secondary market disclosure in connection with obligations issued by the City of Bayonne and conduit financings in which the City of Bayonne is an obligated borrower. Specifically, the City of Bayonne failed to timely file certain annual financial information and operating data for the years ended December 31, 2014 through 2016. In addition, the City of Bayonne’s unaudited annual financial statement for the year ended December 31, 2017 was timely filed prior to the required submission date, but the audit report for the year ended December 31, 2017 was not approved by the City of Bayonne City Council until its April 17, 2019 meeting. The City of Bayonne also did not promptly file event notices relating to its failure to timely file and certain underlying, insured and enhanced rating changes.

PREPARATION OF OFFICIAL STATEMENT The City hereby states that it has compiled, prepared and reviewed this Official Statement with the assistance of Bond Counsel, Corporation Counsel, the Municipal Advisor and the Auditor as described herein. The descriptions, statements and financial, demographic and statistical information contained in the Official Statement are true and correct in all material respects and it will confirm same to the Underwriter of the Bonds, by certificates signed by certain City officials and officers. See “CERTIFICATES OF THE CITY” herein. Bond Counsel has participated in the preparation and review of this Official Statement, but has not participated in the collection of the financial, demographic and statistical information contained in Appendix A and Appendix B and throughout this Official Statement, nor has it verified the accuracy, completeness, or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto.

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Corporation Counsel has not participated in the preparation of the information contained in this Official Statement, nor has he verified the accuracy, completeness, or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto, but has reviewed the section under the caption entitled “LITIGATION” and expresses no opinion or assurance other than that which is specifically set forth therein with respect thereto. Donohue, Gironda, Doria & Tomkins, LLC, Bayonne, New Jersey, Auditor to the City (the “Auditor”), has not participated in the preparation or review of the information contained in this Official Statement, except as hereinafter noted, nor has it verified the accuracy, completeness or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto, but (a) has assisted in the assembling of certain information contained in Appendix A of this Official Statement from sources which the City considers to be reliable and the Auditor makes no warranty, guaranty or other representation with respect to the accuracy and completeness of such information, and it will confirm same to the Underwriter of the Bonds, by a certificate signed by an authorized officer, and (b) has prepared Appendix B to this Official Statement and takes responsibility for the financial statements to the extent specified in their Accountant’s Compilation Report and Independent Auditors’ Report and it will confirm same to the Underwriter of the Bonds, by a certificate signed by an authorized officer.

MUNICIPAL ADVISOR NW Financial Group, LLC, Hoboken, New Jersey has served as Municipal Advisor to the City with respect to the issuance of the Bonds (the “Municipal Advisor”). The Municipal Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of, or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement and the Appendices hereto. The Municipal Advisor is an independent firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

RATING Moody's Investors Service, Inc. ("Moody's" or the "Rating Agency") has assigned a rating of "A3" to the Bonds. The ratings reflect only the views of the Rating Agency and an explanation of the significance of such rating may only be obtained from the Rating Agency. There can be no assurance that the rating will be maintained for any given period of time or that it may not be raised, lowered or withdrawn entirely if, in the judgment of the Rating Agency, circumstances so warrant. Any downward change in or withdrawal of such rating may have an adverse effect on the marketability or market price of the Bonds.

FINANCIAL STATEMENTS The financial statements of the City as of December 31, 2019 (Unaudited) and as of December 31, 2018 (Audited) have been prepared by Donohue, Gironda, Doria & Tomkins, LLC, Bayonne, New Jersey (the “Auditor”). Accordingly, the Auditor takes responsibility for their Accountant’s Compilation Report and Independent Auditor’s Report appearing and set forth in Appendix B attached hereto.

RISK FACTORS The World Health Organization has declared a pandemic following the global outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus. On March 13, 2020, President Trump declared a national emergency to unlock federal funds and assistance to help states and local governments fight the pandemic. Governor Phil Murphy (the "Governor”) of the State of New Jersey (the "State”) has declared a state of emergency and a public health emergency on March 9, 2020 due to the outbreak of COVID-19, which has spread to the State and to many counties within the State, and has also instituted mandatory measurers via various executive orders to contain the spread of the virus. These measures, which alter the behavior of businesses and people, are expected to have negative impacts on regional, state and local economies.

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The finances and operations of the City may be materially and adversely affected as a result of the continued spread of COVID-19 through reduced or delayed revenue streams, which include the collection of property taxes which are the City’s primary revenue source for supporting its budget. The City cannot predict costs associated with a potential infectious disease outbreak like COVID-19 such as operational costs to clean, sanitize and maintain facilities, or costs to operate remotely and support City functions and critical government actions during an outbreak, or any resulting impact such costs could have on the City operations. The degree of any such impact to the City operations and finances, is extremely difficult to predict due to the dynamic nature of the COVID-19 outbreak, including uncertainties relating to its (i) duration, and (ii) severity, as well as with regard to what actions may be taken by governmental and other health care authorities to contain or mitigate its impact. The continued spread of the outbreak could have a material adverse effect on the City and its economy. The City is monitoring the situation and will take such proactive measures as may be required to maintain its functionality and meet its obligations, however, the City, cannot predict the effect the spread of COVID-19 will have on its finances and operations.

MISCELLANEOUS

This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of Bonds made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. CITY OF BAYONNE ___________ DONNA L. MAUER Chief Financial Officer DATED: April __, 2020

APPENDIX A

CERTAIN FINANCIAL AND DEMOGRAPHIC INFORMATION

CONCERNING THE CITY OF BAYONNE

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THE CITY OF BAYONNE GENERAL INFORMATION

Introduction

The City of Bayonne (the "City") is situated on a peninsula bounded by water on three sides - Newark Bay on the West, Upper New York Bay (the entrance to the New York metropolitan area's water front) on the east, and the Kill van Kull on the South, a narrow body of water which connects Newark and Upper New York Bays. The City of Jersey City forms the City's northern boundary.

Settled in March of 1646 as a resort center for people living in the interior parts of New Jersey and New York State, the City became a township in 1861, and was incorporated as a city on March 10, 1869. The City is 5.63 square miles in area (approximately three miles long and one mile wide, with the Peninsula at Bayonne Harbor it is at least 2.5 miles wide), or approximately 3,450 acres of which 2,524 acres is developed land area. Based on the 2010 census, the City has a population of 63,024 residents.

The City's location and availability of water frontage for loading and unloading waterborne freight and its residential use on the western side of the City provide a broad tax base for the City.

The principal retail business and shopping areas are located along Broadway, a north to south thoroughfare. Except for Broadway and J.F.K. Boulevard, the north to south thoroughfares are avenues in alphabetical order, starting with Avenue A on the western side. Cross streets are in numerical order from 1 to 63, with 63rd Street and the New Jersey Turnpike extension to the Holland Tunnel being approximately the dividing line between the City and Jersey City. The City's residential area encompasses essentially the land between Newark Bay and Avenue F from 1st Street to 58th Street, except for the concentrated area of office and retail shops on Broadway and a few other small areas.

There are a number of historic landmarks in the City, including such edifices as: St. Mary's Star of the Sea Church, a mix of Victorian and Romanesque styles; the Bayonne Public Library, an example of Classical Revival architecture; and St. Henry's Church, an example of Gothic architecture.

Cultural activities include an art center at the Bayonne Jewish Community Center, the City-maintained Firehouse Museum holding firefighting memorabilia and the Bayonne Historical Society. Ten civic and fraternal groups, such as the Chamber of Commerce and the Bayonne Women's Club, provide forums for the exchange of ideas and camaraderie for those in business or over the age of eighteen. Activities for younger people are sponsored by the Bayonne Family Community Center, the Bayonne PAL, the Boy Scouts of America, the Bayonne Little League, the Cal Ripken League, Pop Warner Football, Bayonne Youth Hockey, the Jewish Community Center, and the City through its thirteen parks, fifteen playgrounds, and two County-operated parks (see "Recreational Facilities" herein). For those people who play golf, the Bayonne Golf Club, a private waterfront golf course opened in 2006. Facilities are also available on Staten Island or in Union and Middlesex Counties to the west within about thirty minutes driving time. A private golf course is also available in Jersey City. Recently Bayonne started a very successful Food Truck festival which is planned for a third year as well as the multi-year running Bridge Arts Festival which includes local artists, various vendors and performance acts.

CITY GOVERNMENT

In November of 1961, the City's voters approved a Mayor and Council Form of Government (Plan "C" of the Optional Municipal Charter Law). The City is divided into three wards, with a Council person elected from each ward and the Mayor and two Council persons elected at large by all the voters in the City for respective terms in office of four years.

Mayor James Davis was elected Mayor of Bayonne on June 10, 2014. Mayor Davis was a member of the Bayonne Police Department for 28 years, rising through the ranks from Patrolman to Captain. During his tenure as a police officer, he served in conjunction with numerous state and federal agencies’ investigative units. Mayor Davis was re-elected for a second four year term on May 8, 2018.

Council President Sharon Ashe-Nadrowski is an At-Large Councilwoman serving her second term. Ms. Nadrowski is the

first female Council President in Bayonne’s history.

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Cornelius Carroll III represents the first Ward, Salvatore Gullace represents the second Ward, Gary LaPelusa, Sr. represents the third Ward, and Juan M. Perez is an At-Large Councilman. All Councilmembers are serving their second term with the exception of Councilman LaPelusa who is serving his third term and Councilman Carroll who is serving his first term.

The legislative power of the City is vested in the Municipal Council, which meets approximately once every three weeks.

The Mayor has the power to approve ordinances adopted by the Municipal Council or to return ordinances to the

Municipal Council with a statement of his objections. A two-thirds majority of the Municipal Council members may override the Mayor's veto. The Mayor cannot vote in proceedings of the Municipal Council except to fill a vacancy, in which case the Mayor may cast the deciding vote. The Mayor has the executive power and is responsible for enforcing the charter, ordinances and general laws of the City, and supervising all City departments. The Mayor appoints the directors of all departments with the advice and consent of the Municipal Council.

On February 17, 2016, the Mayor and Municipal Council voted to approve a plan to increase the number of City

departments from four to five in an attempt to create more accountability and improve efficiency. Under the approved plan, the existing departments were consolidated into the Department of Business Administration, directed by Joseph DeMarco, the Department of Finance, directed by Terrence Malloy, the Department of Law, directed by John F. Coffey II, Esq., the Department of Public Safety, directed by Robert Kubert, and the Department of Public Works, Parks and Recreation, directed by Gary S. Chmielewski. Each appointment is subject to the advice and consent of the Municipal Council.

DEPARTMENT OF BUSINESS ADMINISTRATION Business Administrator

Terrence Malloy was appointed the City's Business Administrator on December 19, 2018. Mr. Malloy has served as

Director of Finance, Municipal Controller and Chief Financial Officer. An honors graduate of Rutgers University with a BS degree in Accounting, Mr. Malloy is a Certified Municipal Finance Officer and is a member of the Government Finance Officers Association of New Jersey. Mr. Malloy was appointed Business Administrator and Director of Finance on August 19, 1998 and served as the City's Chief Financial Officer from April of 1988 to December 2018. Mr. Malloy has been in the Department of Finance since June of 1980. Mr. Malloy served as Mayor from October 17, 2007 to November 4, 2008. Mr. Malloy recently announced his plans to retire from his position effective April 31, 2020. Chief Financial Officer Donna Mauer was appointed the Chief Financial Officer as of February 4, 2019. Ms. Mauer holds a B.S. in Business Administration from New Jersey City University and a Masters of Public Administration from Fairleigh Dickinson University. She is a Certified Municipal Finance Officer and is a member of the Government Finance Officers Association of New Jersey. Ms. Mauer previously worked for the City of Jersey City from March of 1987 to February 1, 2019. She held various positions, including Assistant Budget Officer and served as the Chief Financial Officer from December 2005 until February 2019. Assistant Business Administrator

Melissa Mathews is the current Assistant Business Administrator. Previously she worked in Planning and Zoning as the assistant Zoning officer. Prior to her work with the City of Bayonne Ms. Mathews worked in finance at Citigroup and Credit Suisse where she held her Series 7 and 63. She also worked in technology at Apple and Adobe systems. She holds a B.A. in Political Science from Columbia University. She is the founder of the Mathews Foundation which runs a sign language program at the public library as well as the expansive community gardening program that is underway called Grow Bayonne.

City Clerk

Madelene C. Medina was appointed City Clerk on June 1, 2019. Ms. Medina received an Associate’s Degree in accounting from Taylor Business Institute. Ms. Medina is a Registered Municipal Clerk and a certified Municipal Registrar of Vital Statistics. She is a member of both the Clerk’s Association and Registrar’s Association of the State of New Jersey. Ms. Medina is the first African-American Female City Clerk in Bayonne’s history.

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Department of Law

John F. Coffey II, Esq., is licensed to practice law in the State of New Jersey, and was appointed as the City’s Corporation Counsel in August 2014 and Director of Law in February 2016. Mr. Coffey graduated from Fairfield University in 1984 with a BA in American Studies, and in 1987 attained his Juris Doctor degree from New York Law School. Mr. Coffey was Assistant City Attorney from 1990 to 2002, and City Law Director from June 2002 to May 2009.

Tax Collector

The Tax Collector for the City of Bayonne retired on July 1, 2019. The City currently has an agreement with the Township of Weehawken to share Tax Collector services until July 31, 2020.

Tax Assessor Michele Hennessey, a Certified Tax Assessor, was appointed Tax Assessor on July 1, 2019 and served as Deputy Tax Assessor since March, 2017. Ms. Hennessey holds a B.S. from Rutgers University and a Master’s Degree in Public Administration from Farleigh Dickinson University. Ms. Hennessey is a member of the Association of Municipal Assessors of New Jersey since 1993 and has held several offices over the years. Prior to joining the Bayonne Tax Assessor’s staff, Ms. Hennessey was employed for 26 years in the Jersey City Tax Assessor’s office holding various positions including Deputy Tax Assessor from October 2004 through February, 2017.

DEPARTMENT OF PUBLIC SAFETY Director of Public Safety

Robert “Red” Kubert was appointed Director of Public Safety on July 1, 2014. As a former uniformed employee, Mr.

Kubert attained the rank of Chief of Police. He retired from his position in 2012 after over 40 years of service to the Bayonne Police Department. As Director, Mr. Kubert oversees the Police and Fire Departments. Police Department

The Police Department is under the supervision of Police Chief Robert Geisler. The Police Department has 1 Chief, 2 Deputy Chiefs of Police, 6 Captains, 8 Lieutenants, 39 Sergeants, 124 Uniformed Officers and 32 Civilians. Fire Department

The Fire Department is under the supervision of Fire Chief Keith Weaver. Fire Department personnel consists of 1 Fire Chief, 2 Deputy Fire Chiefs, 5 Battalion Chiefs, 40 Captains, 126 Uniformed Firefighters and 4 full-time civilians.

DEPARTMENT OF PUBLIC WORKS AND PARKS Director of Public Works and Parks

Thomas Cotter was appointed Director of Public Works and Parks in November 2018. Mr. Cotter oversees the operations of the DPW’s maintenance of roads, municipal property, collection of solid waste from street containers and collection of recyclable materials by 109 DPW personnel. Recreational Facilities

The County maintains two parks, the 97.6 acre Bayonne Park along Newark Bay in midtown, and the 5.5 acre Mercer Park on the City's northern border with Jersey City.

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The Bayonne Parks Department maintains thirteen parks (56.9 acres) and fifteen playgrounds (2.2 acres) in various sections of the City. In addition to the park system, there is an indoor skating facility, a swimming pool facility, a skateboard park and Veterans Memorial Stadium with 4,200 permanent seats and room for a large number of temporary seats. In addition to maintaining baseball diamonds, soccer and bocce fields, basketball courts, tennis courts, and jogging and bike trails, the Bayonne Parks Department oversees Little League and Senior Citizen activities. The City is constantly working to upgrade and improve its parks and recreational facilities and have a number of projects planned and under construction. Currently new parks and waterfront walk ways under construction behind Veterans Memorial stadium and at the Peninsula at Bayonne Harbor, and a land reclamation and park upgrade are underway at Collins park on the south side of the city. In addition, the city has plans for a new park with water front walk way, fishing pier and kayak launch just south of 16th street park.

Bayonne’s Division of Recreation headed by Pete Amadeo is often recognized for providing some of the best recreation

activities in Hudson County for mainstream and special needs children of all ages. A multitude of sports activities are offered including skateboarding, hockey, travel camps, special needs baseball, recreation flag football and pillow hockey, swimming and 7 summer camps, as well as the ability day program for special needs adults. Countless private activities including gymnastics, bowling, dance classes and art classes make Bayonne a destination for families.

Parking Utility Effective January 1, 2012, the Bayonne Parking Authority (the “BPA”) was officially dissolved and the Bayonne Parking Utility was created. The Bayonne Parking Utility is accounted for as a separate Utility Fund on the books and records of the City. The City has determined to initially assume all of the outstanding debt and obligations of the BPA as a means of providing the City the immediate ability to continue providing parking service while insuring the timely and efficient payment of the obligations and debt of the BPA. The operations of the Utility are funded through parking fees and ticket charges.

OTHER ENTITIES Public Library

The Bayonne Public Library system consists of the main library, originally built with the support of the Andrew Carnegie Foundation, and two branch libraries. In addition to 264,487 conventional volumes, there are 219 periodicals, 439 CD Rom Disks, 5,627 audio and video cassettes and thousands of microfilm reels and microfiche for current and historical newspapers and government documents. The main library sponsors academic and senior citizen programs, children's "Story Telling Hours", various cultural programs and exhibits, including annual series of jazz and classical music. The main library has facilities to accommodate up to 900 people for meetings and seminars. Economic Development

The Bayonne Urban Enterprise Zone Development Corporation is manager of the Special Improvement District. The Special Improvement District was originally incorporated in November, 1990, to assist in the economic development of the shopping district from 19th Street to 27th Street on Broadway. In the year 2000, the Municipal Council approved the expansion of the Special Improvement District to include the area of Broadway between 17th Street and 30th Street.

The Bayonne Office of Community Development has four programs funded by the federal government to help provide for home and business improvements and rehabilitation through various assistance Community Block Grants. Currently, the Bayonne Office of Community Development has outstanding applications for these federal grants. A federal grant will cover only approximately 25% of the improvements and rehabilitation for those business concerns located on Broadway in the Special Improvement District. In addition to grants for the private sector, grants are available for the City's infrastructure improvements, such as streets, playgrounds and parks.

The largest and most visible current development was the relocation and construction, completed by the State, of State

Route 169 into a four-lane divided limited access highway from its connection with State Route 440 at Newark Bay to the industrial districts along the Upper New York Bay waterfront and connection to the Bayonne Bridge over the Kill Van Kull.

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The “Harbor Station South” shopping area, including a 150,000 square foot Costco which opened in March of 2019, is being completed to include 250,000 square feet of commercial space. Currently under construction are LA Fitness, Starbucks, Lidl, CVS as well as other retail space. This shopping center is located off of Route 440 at the entrance of the Peninsula at Bayonne Harbor and directly across from the Hudson Bergan Light rail station at 34th street. The city is currently working on plans for a pedestrian bridge to directly connect to the light rail station.

The Bayonne Urban Enterprise Zone (the ”BUEZ”) was formally approved by the State of New Jersey in September

2002, which includes the entire Special Improvement District, plus all other retail zones as well as the entire Military Ocean Terminal. This has a multiplier effect on the recent increase in development that the City is experiencing. Future projects planned by the BUEZ include streetscapes, parking facility improvements, and a loan program for member businesses.

Redevelopment Bayonne is at a pivotal point in its history and is rapidly becoming a go-to destination for commuters looking for a suburban feel in an urban center. With its close proximity to New York City Bayonne offers a short commute with ample public transportation modes, including a planned ferry directly to lower Manhattan, while still maintaining its small-town suburban feel. Within the last year Bayonne saw the completion of approximately 1000 residential units across the city and some of the larger buildings reported being 70% rented within the first month. Currently we have approximately 2,400 approved units under construction or in the permitting process expected to get certificates of occupancy within the next 12 months and some projects are on phase 2 of their construction. While construction is on-going throughout most of the city the majority of the development is focused in the Avenue E corridor along the light rail which is referred to as the Loft District and at The Peninsula on Bayonne Harbor. The Loft District is comprised of a multitude of multi-family buildings along Avenue E with the majority surrounding the 22nd street Hudson Bergan Light Rail station. The most prominent of the loft district buildings is the Silk Lofts which is a conversion of the historical Maidenform factory building into 85 residential units which preserved the architectural integrity of the structure while providing luxury loft living. As the flagship for the district, many of the buildings have followed suit and include loft style apartments with luxury amenities. In 2019 there were an estimated 320 units completed with approximately 600 currently approved in this district. The redevelopment extends well beyond the 22nd street station down the length of Avenue E The Peninsula at Bayonne Harbor is another area rapidly changing and drawing new residents to the city. With easy access to shopping, Route 440, expansive views of both Manhattan and New York Harbor, public transportation and ample amenities and recreational spaces, this area is quickly becoming the place to be for new residents. With continued development including a planned hotel, planned 25 building apartment complex with amenity spaces and retail, and ferry access to Manhattan should continue to draw new and current residents alike. In addition to residential development the city has seen a renesance in development of commercial construction. Approximately 230,000 square feet of commercial space was completed and occupied in the last 12 months with businesses including Costco, Cube smart, Quick check and other smaller stores. With all the new development Bayonne has seen an influx of new retail and restaurant establishment and expansions of current spaces as well. EDUCATIONAL FACILITIES

In addition to the public school system, there are three denominational high schools and six denominational schools for pre-high school students. Additionally, there are pre-school facilities available.

Nearby higher educational facilities consist of St. Peter's University, New Jersey City University and Hudson County Community College in Jersey City, Stevens Institute of Technology in Hoboken, St. John’s University in Staten Island and in Newark, Rutgers - The State University, University of Medicine and Dentistry, New Jersey Institute of Technology and Seton Hall University School of Law.

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BOARD OF EDUCATION OF THE CITY OF BAYONNE General Information

The School District of Bayonne (the "District") was established in 1890. On November 3, 2015, Bayonne held its first school board election in over thirty-five years. The District has opted to hold Board elections with November general elections. The Board of Education of the City of Bayonne (the "Board") governs the operations of the District and is responsible for approving all fiscal matters. The District's Fiscal Year begins July 1 and ends June 30 in the next calendar year.

The Board is composed of nine members, each serving for a three-year term on a staggered basis. The President and Vice President are chosen for one-year terms from among the Board members. The Board is a policy-making body and has the general responsibility to provide an education program, to establish policies, to supervise the public schools in the District, and to appoint the Superintendent of Schools (the "Superintendent").

The administrative structure of the Board gives final responsibility for both the educative process and the business operation to the Superintendent. The Superintendent is the chief executive officer of the Board in charge of carrying out Board policies. The Board Secretary is the chief financial officer who must submit monthly financial reports to the Board and annual reports to the State Department of Education. State law requires a Treasurer of School Monies to hold in trust all school monies and to make a monthly report to the Board. The debt service requirements of school purpose debt issued prior to November 3, 2015 is paid by the city, except for that portion paid by the State directly to a paying agent (Additional State School Aid Bonds). District Principal Officials

Mr. John J. Neisz is the Superintendent of Schools as of August 2019. Mr. Daniel Castles is the School Business Administrator as of September 2019. District Personnel

The following table sets forth by classification the number of personnel the District employs:

(1) For the fiscal year ended June 30, 2019 Source: CAFR for fiscal year ended June 30, 2019 District Facilities

The Board presently operates a high school complex consisting of a high school building and separate Physical Education/Community Education Center buildings with outdoor physical facilities, eleven elementary schools and two buildings housing a garage and maintenance facilities.

Number of

Classification

Instructional Personnel 913

Student and Instruction Related Services 50

General Administration 24

School Administration 63

Central Services 16

Plant Operation and Maintenance 138

Pupil Transportation 42

Administrative Information Technology 10

Total Personnel 1,256

Personnel (1)

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Historical Student Enrollment

School Building Facilities

(1) Includes Special Education and Adult High School Source: CAFR for fiscal year ended June 30, 2019

Fiscal Year

2018-2019 5,812 1,894 1,659 9,365 2017-2018 5,735 2,007 1,665 9,407 2016-2017 5,800 1,997 1,662 9,459 2015-2016 5,757 2,115 1,665 9,537 2014-2015 5,787 2,004 1,311 9,102 2013-2014 5,819 1,878 1,333 9,030 2012-2013 5,575 2,069 1,331 8,975 2011-2012 5,548 2,204 1,355 9,107 2010-2011 5,903 2,180 1,333 9,416 2009-2010 5,785 2,216 1,142 9,143 2008-2009 5,745 2,088 1,418 9,251

GradesK-8

Total EnrollmentOther

Grades9-12

Addition orConstruction Renovation

Type of Facility Date Date

High School 1923 1935/1983 2,438

Elementary Schools:1. Henry E. Harris 1921 1973/2000 707 2. Philip Vroom 1914 485 3. Walter F. Robinson 1909 792 4. Mary J. Donohue 1920 2000 444 5. Lincoln 1919 1985 428 6. Horace Mann 1913 1924 572 8. Midtown Community 1993 1,193 9. Washington 1917 2000 723 10. Woodrow Wilson 1930 735 12. John M. Bailey 1911 2001 688 14. Nicolas Oresko 2008 432

9,637

Enrollment (1)2018-2019

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State and Federal School Aid

The District receives State and federal aid annually, for various operating purposes. The following table sets forth on a Fiscal Year basis the General Fund Revenues, the amount of State and federal school aid, and the percentage of such school aid to the General Fund Revenues.

Source: CAFR for fiscal year ended June 30, 2019

LAND USE

Residential

There are few homogeneous areas where single family residences exist, except for a four-block area along Newark Bay just south of the County's Bayonne Park. The principal residential type of usage is multi-family, which includes two-family houses primarily, three- to four-family houses, rowhouses, townhouses, garden apartments, and mid- and high-rise apartments. Mid- and high-rise apartments are only situated on isolated sites along the southern waterfront, the northwest section of the City, and within urban renewal districts. Existing high-rise apartment structures are not considered a significant residential land use. Commercial

The major commercial activity in the form of retail stores is concentrated along Broadway, a situation that has not changed from the City's early times. Some major commercial establishments exist on Avenue C between 24th and 27th Streets, Avenue A and North Street and Route 440, including the aforementioned “Bayonne Crossing” and “Winners” complex.

There are shopping areas at each end of the City as well as a mixture of retail shops and services and professional and

commercial offices along Broadway. The City also has a number of small and mid-size industries that provide employment for area residents and enhance tax revenues for the City. Office/Professional

This type of activity consists typically of medical or legal office space from converted single-family residences. Mixed Use

Many of the apartment units have been converted to professional office space. There are a number of mixed use properties, located primarily along the principal north-south thoroughfares. Industrial Districts

There are four industrial districts plus the Peninsula at Bayonne Harbor located along the City's eastern and western waterfronts.

(A) (B) (B) (C)General Fund State Federal Percentage

Fiscal Year Revenues School Aid School Aid of B to A

2019 154,093,350$ 83,374,471$ 342,620$ 54.3%2018 143,697,838 75,255,011 312,157 52.6%2017 137,333,797 71,794,994 365,284 52.5%2016 131,481,828 67,955,758 378,139 52.0%2015 128,311,692 66,977,550 412,176 52.5%2014 125,956,577 64,455,293 271,720 51.4%2013 126,153,231 66,284,994 335,780 52.8%2012 122,023,932 60,980,982 2,104,351 51.7%2011 118,408,258 57,087,479 293,792 48.5%2010 121,627,100 53,832,724 8,396,836 51.2%

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53rd Street District

This district encompasses approximately 19 acres in the northwest portion of the City along Newark Bay, and is the newest district established. Presently, there are only six firms located in this district, two of which are small manufacturing firms. There are six acres of vacant land in this district on which development is constricted due to possible subsurface soil contamination. There is no rail access and access by road is through residential areas.

Bergen Point District

Located at the City's southwest corner on Newark Bay and the Kill Van Kull, Bergen Point covers an area of 138 acres. Firms in this district are comprised of smaller metals and chemicals manufacturing firms and light industry. Land for expansion of existing firms is limited, with the exception of a 57 acre Texaco tract. Texaco has moved its facilities from Bayonne. Texaco is presently clearing and cleaning the area under the guidance of the Environmental Clean-up Responsibility Act prior to the sale of the 57 acres.

Road access is excellent via the Bayonne Bridge to Interstate Route 287. Access from or to the north is via the four-lane divided limited access State Route 440 (formerly Route 169). Rail access is available via a branch of the Conrail-owned Bayonne Industrial Track. Port Jersey District

Located in the City's northeast portion along the Jersey City borderline and Upper New York Bay, Port Jersey encompasses 160 acres in the City of a total of 400 acres, the balance being in Jersey City. Of the fourteen concerns located in Port Jersey, eleven are warehouse/distribution centers, and include such firms as Todd Logistics, Global Terminal & Container Services, Unimark, Workbench, BMW Distributions and Preparation Center, and a New York and New Jersey Port Authority operated distribution center for foreign-made cars. Port Jersey is one of the major distribution centers in the New Jersey and New York areas.

Road access to Port Jersey is via Exit 14A of the New Jersey Turnpike and State Route 440 to Pulaski Street. Although not currently available, rail access to Port Jersey could be made available from the Conrail-owned Bayonne Industrial Track. Constable Hook District

Located on Upper New York Bay along the City's eastern/central waterfront, Constable Hook (the "Hook") encompassing roughly 727 acres, is the largest and most heavily concentrated of all the districts. However, approximately 87 acres in the upland area is currently vacant. The area north of 22nd Street is comprised of various warehouse/distribution and light industrial firms. Within the Hook are 55 firms, including such corporations as Exxon, Amerada Hess, IMTT and Coastal Oil.

Road access to the Hook is via State Route 440 to various access roads, such as the Hook Access Road. Since the completion of improvements to State Route 440, access to the Hook has been improved. Rail access is by the Conrail-owned Bayonne Industrial Track. Peninsula at Bayonne Harbor (formerly Military Ocean Terminal)

This military facility is situated on 700 acres between the industrial districts of Port Jersey and Constable Hook on Upper New York Bay. The Peninsula at Bayonne Harbor contains a causeway, an artificial peninsula extending two miles into Upper New York Bay, with piers for ocean going vessels, railroad tracks and roadways, a drydock over 1,000 feet long capable of handling any ship afloat, storage facilities, various office-type buildings and residential buildings for military personnel and families. On an average day, between 150 and 200 trucks enter the Terminal area for unloading in addition to rail freight via the Bayonne Industrial Track. Approximately 1,000,000 square feet of smart ware house space are approved and or under construction with an expected completion date with the next 12 months. It should be noted that this military facility is closed. The City is actively working to complete the vision of converting the former military base into a viable commercial, residential and park development.

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The Peninsula at Bayonne Harbor is a visionary plan which is quickly coming to fruition. The plan is to transform the former Military Ocean Terminal into a vibrant, mixed-use waterfront community. The peninsula calls for the creation of six different, yet integrated districts, consisting of residential, commercial, entertainment and recreation space, as well as marinas, ferry service and more than two miles of waterfront walkway. The Peninsula at Bayonne Harbor currently has approximately 1,000 rental units with another 1,000 planned approved units expected to be completed within the next 12 months. 2019 saw the opening of a 150,000 square foot Costco at the entrance with another 100,000 square feet of retail space currently under construction. Plans for a ferry terminal with included parking facility are underway and ferry service by Seastreak is expected to start winter 2021. The ferry will offer a direct line to lower Manhattan. With a choice location in New York Harbor and stunning views of the Statue of Liberty and the Manhattan skyline, development of the 430 acre tract promises to be the most significant urban waterfront development in the New York/ New Jersey region since the build-out of Battery Park City in New York and the Gold Coast Waterfront communities of Hoboken, Weehawken and Jersey City in New Jersey. Quasi-Public

This category of land use includes property owned privately yet generally operated for the public use and includes such institutions as hospitals, churches, private and denominational schools, and fraternal organizations. Areas

The waterfront areas on the City's western and southern sides provide opportunities to integrate existing public park facilities and provide for flexible zoning for residential and business unit development with access oriented towards the water as concepted in a "Land Use Plan Element". Medical Facilities

Bayonne Medical Center is the major private medical facility serving the City. In addition, RWJBarnabas has an 80,000 square foot satellite medical facility on Broadway in the center of town. Other health services include urgent care facilities such as CityMD, Bayonne Community Mental Health Center, Bayonne Physical Therapy and Rehabilitation, two diagnostic laboratories - Hudson Medical Lab and Bayonne Medical Laboratories, Inc., and the Medi-Center for outpatient services. Bayonne Medical Center also operates a Renal-Dialysis Center. Ambulance service is provided by McCabe Ambulance Service, which has a zero sum contract with the City.

Bayonne Medical Center has a capacity of 278 beds. The City operates a clinic in the Municipal Building for testing of

blood pressure and other types of tests. Housing Authority of the City of Bayonne

The Housing Authority of the City of Bayonne (the "Housing Authority"), operating under the guidelines of the U.S.

Department of Housing and Urban Development ("HUD"), owns and maintains 1,879 public housing and senior citizen dwelling units in 36 buildings.

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NEW CONSTRUCTION AND HOUSING STATISTICS

New Construction Building Permits

Housing Statistics

Housing Units Authorized To Be Built

Year Ended Single Two Three and Five orDec. 31, Family Family Four Family More Total

2019 8 28 31 1,076 1,143

2018 15 28 12 702 757

2017 20 0 22 516 558

2016 46 0 3 14 63

2015 44 0 6 138 188

Estimated Construction Costs

Year Ended Single Two Three and Five orDec. 31, Family Family Four Family More Total

2019 2,144,964$ 3,775,886$ 3,226,625$ 42,133,035$ 51,280,510$

2018 1,556,450 3,689,600 1,672,100 60,576,927 67,495,077

2017 10,483,575 - 3,279,200 73,635,517 87,398,292

2016 6,319,008 - 199,338 1,756,264 8,274,610

2015 4,818,769 - 398,676 16,602,126 21,819,571

Housing Units

Political One Unit One Unit 2-4 5-9 10 or Mobile Boat, RV, TotalDivision Detached Attached Units Units More Units Homes Van, etc. Units

City 3,663 1,557 13,824 2,507 5,597 124 - 27,272

County 26,756 15,194 102,721 31,662 102,795 427 107 279,662

State 1,931,259 342,782 564,725 172,006 559,793 34,236 600 3,605,401

Homeowner Rental Persons PerPolitical Vacancy Vacancy Owner Persons PerDivision Occupied Vacant Rate Rate Occupied Unit Household

City 25,237 2,562 2.6% 8.9% 2.67 2.49

County 246,437 23,898 4.5% 6.6% 2.66 2.54

State 3,214,360 339,202 1.8% 7.6% 2.79 2.68

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Source: New Jersey Department of Labor, Labor Market and Demographic Research. 2010 Federal Census Data

TRANSPORTATION FACILITIES

Interstate, intrastate and inter-city public transportation is provided by New Jersey Department of Transportation - Bus Operations and other bus companies.

The major highways serving the City from the north are State Route 440 (formerly Route 169), and the New Jersey Turnpike Extension by egress and access ramps 14A. To the south, the Bayonne Bridge over the Kill Van Kull to Staten Island provides connection to east/west Interstate Route 287 and to Long Island via the Verrazano Narrows Bridge.

In addition to the New Jersey Turnpike Extension providing connections to north/south Interstate 95 and U.S. Routes 1 and 9, State Route 440, a four-lane limited access highway parallel to Newark Bay, provides non-toll access across Newark Bay to U.S. Routes 1 and 9 and Interstate Route 95.

State Route 440 provides a connection to the industrial districts and the United States Military Ocean Terminal located

to the east on Upper New York Bay. State Route 440 has been expanded and realigned as a four-lane divided highway, and extended to provide a connection with the Bayonne Bridge. The realignment and extension of Route 440 eliminates the movement of freight over local streets.

In April, 2000, the first phase of the Hudson-Bergen light rail system began transporting commuters. The light rail runs

parallel on the west side of State Route 440, with four stations located at 8th Street, 22nd Street, 34th Street and 45th Street, running through Exchange Place in Jersey City and ending in Hoboken.

Movement of rail freight is by one rail line, which is the Conrail-owned Bayonne Industrial Track with branch lines serving three industrial districts. The Bayonne Industrial Track is a single line track running from the northeast corner of the City parallel to the Upper New York Bay to the City's southern point, along the Kill Van Kull. The rail line divides a portion of the residential section along the City's eastern and southern sides.

UTILITIES

General

Electricity and gas are provided by Public Service Electric and Gas Co. Telephone service is provided by Verizon. Solid waste pickup is provided to residences, offices and retail stores by a negotiated contract with outside vendors. Larger business concerns and corporations, such as Exxon, IMTT and Bayonne Medical Center, must make their own provisions for the carting away of solid waste.

Number of Units by Owner-Specified Valuation

Political Under $100,000- $200,000- $300,000- $500,000- $1,000,000 Total MedianDivision $100,000 $199,999 $299,999 $499,999 $999,999 or More Units Value

City 524 940 2,621 4,588 721 92 9,486 320,300$

County 3,168 7,553 17,110 30,670 17,757 4,124 80,382 364,100$

State 115,887 321,283 471,085 684,977 389,877 71,304 2,054,413 327,900$

Renter-Specified Monthly Contract Rent Per Unit

Political Under $500- $1,000- $1,500- $2,000- $2,500 Total MedianDivision $500 $999 $1,499 $1,999 $2,499 or More Units Rent

City 1,380 2,770 7,030 2,936 764 220 15,100 1,221$

County 13,595 30,944 60,487 31,165 13,302 22,771 172,264 1,340$

State 88,733 200,807 445,226 231,700 88,979 65,707 1,121,152 1,295$

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Water/Sewer Services

The water/sewer services are provided by the Bayonne Municipal Utilities Authority (the “Authority”), an authority created by an ordinance of the City, duly adopted October 9, 1997 and approved by the Mayor on October 10, 1997. On December 20, 2012, the Authority entered into a concession agreement with Bayonne Water Joint Venture, LLC. Under the terms of the concession agreement, the Authority grants to Bayonne Water Joint Venture, LLC the rights to use, operate, manage, construct, maintain and improve the sewer/water systems, to provide the system services in connection therewith and to receive the revenues from the systems. Additional terms of the concession agreement include the legal defeasance of all existing debt of the Authority. The sewer and water system Deficiency Agreements entered into by and between the City and the Authority on November 17, 1997 remain in full force and effect and have not been amended, modified or waived by any party. Under the original Deficiency Agreements, the City has agreed to make up any deficiencies in the Authority’s sewer budget for operating expenses and debt service on any bonds issued by the Authority. In 1982, the City entered into a contract (the “Service Contract”) with the North Jersey District Water Supply Commission (the “Commission”) that obligates the City to pay for water and for treatment, filtration, transmission and distribution thereof, including installments of interest and principal on bonds relating to the Wanaque South Project. The City is obligated to pay an annual charge based on its proprietary allotment, which is currently 25.868%. Subsequent to the execution of the Service Contract, the Authority assumed all responsibility for the operation of the City’s water system. Further, as part of the above-referenced concession agreement, in 2012 the Bayonne Water Joint Venture, LLC assumed responsibility for all expenses and operations of the Authority, including payments to the Commission of its share of operating expenses and debt service on behalf of the City. Nonetheless, under the Service Contract, the City remains responsible to the Commission in case of any shortfall of operating expenses or debt service payments from Bayonne Water Joint Venture, LLC. Effective January 1, 2017 the Bayonne Municipal Utilities Authority was dissolved and its function has been assumed by the City.

RETIREMENT SYSTEMS

All full-time permanent or qualified City employees who began employment after 1914 must enroll in one of two retirement systems depending upon their employment status. These systems were established by acts of the State Legislature. Benefits, contributions, means of funding and the manner of administration are set by the State. The Division of Pensions within the Treasury Department of the State is the Administrator of the funds with the benefit and contribution levels set by the State. The City is enrolled in the Public Employees' Retirement System and the Police and Firemen's Retirement System.

The Consolidated Police and Firemen's Pension System is no longer open to enrollment. However, there are City pensioners who receive benefits from this pension system, and the City is required to make annual contributions to this pension system. Public Employees' Retirement System

The Public Employees' Retirement System ("PERS") includes approximately 300 employees. PERS is evaluated every year. Employee rates for contributions are normally determined by the rate applicable at the age of enrollment. Police and Firemen's Retirement System

Approximately 348 employees are covered under the Police and Firemen's Retirement System ("PFRS").

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Retirement Benefit Payments

(1) Consolidated Police and Fire Pension Fund - Payments to pensioners. (2) Old Age Security Income - Social Security. Source: The City's 2015 through 2018 audited financial statements and 2019 unaudited financial records.

COLLECTIVE BARGAINING REPRESENTATION Certain City employees are represented by bargaining agents, shown below together with termination dates of current contracts. There are several other bargaining units, but the enrollment is small in these other bargaining units.

INSURANCE On August 17, 2011, the City authorized participation in and the execution of an Indemnity and Trust Agreement with the New Jersey Intergovernmental Insurance Fund (the “NJIIF”) for the provision of property and casualty insurance coverage. Prior to participation in the NJIIF, the City self-insured against liability claims pursuant to N.J.S.A. 40A:10-16. The NJIIF is a public entity created in 1991 and offers coverage to municipalities, counties and school districts statewide. The NJIIF is a New Jersey approved, self-insured, reinsured public entity insurance pool which offers all New Jersey public entities multiple lines of insurance.

System 2019 2018 2017 2016 2015

PERS 2,403,589$ 2,328,121$ 2,167,541$ 2,053,002$ 1,963,155$

PFRS 12,922,325 11,567,534 10,590,150 10,525,623 10,134,691

CP&F (1) 19,037 19,076 19,079 19,060 10,011

OASI (2) 1,923,414 1,884,671 1,946,898 1,931,828 1,905,854

TOTAL 17,268,365$ 15,799,402$ 14,723,668$ 14,529,513$ 14,013,711$

Employee Bargaining TerminationClassification Representation Date

Uniformed Police Police Benevolent Association 12/31/2020

Police Superior Officers Police Superior Officers Association 12/31/2020

Uniformed Firemen Firemen's Mutual Benefit Association 12/31/2020

Fire Superior Officers Fire Superior Officers Association 12/31/2020

Crossing Guards & PEO's AFSCME Local 2261 12/31/2021

Supervisory Personnel The Bayonne Municipal Supervisory Association Hudson Council No. 2

12/31/2021

Various Departments American Federation of State, County and Municipal Employees

12/31/2021

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The City has obtained the following coverage through the NJIIF: Equipment Breakdown coverage. Crime coverage including employee dishonesty, forgery, alterations, theft, robbery and fraud. Environmental Impairment coverage. Workers’ Compensation coverage. General, Automobile and Employee Benefits liability coverage. Public Entity Management Liability coverage, including Public Official’s Liability and Employment Practices Liability

coverage. Surety bonds for the City Treasurer, Chief Financial Officer and Tax Collector.

Source: City summary of insurance coverage.

PROPOSED CAPITAL IMPROVEMENT PROGRAM The City's 2020 Fiscal Year (January 1-December 31) Six Year Capital Improvement Program annual funding

requirements, as set forth by the City prior to introduction of its 2020 budget, is set forth below. The schedule is a planning tool, and will be filed with the State after approval as required by the Local Budget Law. The City is not bound by these projections. Annual Anticipated Funding Amounts

Anticipated Funding Sources and Amounts

Source: The City.

REPORTING PERIOD

The City has changed its fiscal year from a year ended June 30, to a year ended December 31. In order to revert to a calendar year accounting period, the State of New Jersey, Division of Local Government Services requires a six-month “transition year” of the period of time between the end of the City’s final fiscal year and the next succeeding first calendar year.

Estimated Estimated

Completion Cost 2020 2021 2022 2023 2024 2025

Rehabilitation of Various Streets 2025 3,000,000$ 500,000$ 500,000$ 500,000$ 500,000$ 500,000$ 500,000$

LeFante Way Repaving 2020 1,000,000 1,000,000 - - - - -

Various Capital Improvements 2020 500,000 500,000 - - - - -

Total 4,500,000$ 2,000,000$ 500,000$ 500,000$ 500,000$ 500,000$ 500,000$

Anticipated Funding Schedule

Grants in To beEstimated Estimated Aid and Funded in Debt

Completion Cost Other Funds Future Years CIF Authorized

Rehabilitation of Various Streets 2025 3,000,000$ 500,000$ 2,500,000$ -$ -$

LeFante Way Repaving 2020 500,000 500,000 - - 500,000

Various Capital Improvements 2020 500,000 - - 50,000 450,000

Total 4,000,000$ 1,000,000$ 2,500,000$ 50,000$ 950,000$

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The following schedules include information from the six-month transition year of July 1, 2011 to December 31, 2011. Beginning with calendar year 2012, the City’s financial information is reported on a 12-month calendar year.

CURRENT FUND SCHEDULE OF REVENUES

LAST FIVE YEARS (000 OMITTED)

Source: 2015-2018 Audited Financial Statements, 2019 unaudited City records.

CURRENT FUND SCHEDULE OF APPROPRIATIONS LAST FIVE YEARS (000 OMITTED)

Source: 2015-2018 Audited Financial Statements, 2019 unaudited City records.

Budgeted Realized Budgeted Realized Budgeted Realized Budgeted Realized Budgeted Realized

Fund Balance 14,408$ 14,408$ 12,500$ 12,500$ 17,875$ 17,875$ 5,000$ 5,000$ 6,421$ 6,421$

Consolidated Municipal

Property Tax Relief Fund 1,215 1,215 1,626 1,626 1,874 1,874 1,923 1,923 1,923 1,923

Energy Receipts Tax 7,615 7,615 7,204 7,204 6,956 6,956 6,907 6,907 6,907 6,907

Public and Private Revenues

Offset with Appropriations 1,758 14,490 2,366 2,894 1,429 2,361 1,411 1,411 2,186 2,186

Current Tax Levy, Municipal 91,776 93,577 89,247 90,927 86,764 88,593 82,759 84,810 80,629 82,394

Delinquent Taxes 273 174 26 263 23 121 15 414 210 40

Other Budgeted Revenue

Local Revenues 12,257 12,301 10,154 11,706 10,659 10,194 10,469 10,952 10,469 10,375

Shared Service Agreements 52 52 142 52 142 142 72 72 120 -

Other Special Items 11,586 10,237 16,521 37,085 10,769 10,928 26,848 41,831 23,545 22,198

Non-Budget Revenue

and Other Credits - 10,298 - 3,801 - 5,585 - 12,083 - 8,928

140,940$ 164,367$ 139,786$ 168,058$ 136,491$ 144,629$ 135,404$ 165,403$ 132,410$ 141,372$

December 31, 2016

Year Ended

Year Ended

December 31, 2019

(unaudited) December 31, 2015

Year EndedYear Ended

December 31, 2017December 31, 2018

Year Ended

Year EndedDec. 31, 2019 Year Ended Year Ended Year Ended Year Ended(unaudited) Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015

Operating Expenses:

Salaries and Wages 59,213$ 59,519$ 58,824$ 58,250$ 56,586$ Other Expenses 50,691 39,840 38,477 36,776 35,861

Pensions 17,538 16,054 15,014 14,661 14,147

Deferred Charges 43 43 42 - 55

Reserve forUncollected Taxes 1,676 1,740 1,700 1,700 2,600

129,161 117,196 114,057 111,387 109,249

Capital Improvements 1,100 100 20 65 -

Municipal Debt Service 13,581 12,312 13,302 13,775 13,163

School Debt Service 10,520 10,622 10,233 10,273 9,691 154,362$ 140,230$ 137,612$ 135,500$ 132,103$

A-17

CURRENT FUND BALANCES AND

AMOUNTS UTILIZED IN SUCCEEDING YEAR'S BUDGET

(1) Unaudited (2) Six Month “Transition Year” (3) Information not yet available Source: 2011-2018 Audited Financial Statements, 2019 unaudited City records.

DEMOGRAPHIC INFORMATION

Source: 2010 Federal Census Information.

FundYear Balance

Ended End of Year Amount Percentage

Dec. 31, 2019 (1) 21,993,934$ (3) 0.00%

Dec. 31, 2018 28,593,921 14,408,000 50.39%

Dec. 31, 2017 15,411,379 12,500,000 81.11%

Dec. 31, 2016 27,194,343 17,875,000 65.73%

Dec. 31, 2015 5,280,007 5,000,000 94.70%

Dec. 31, 2014 5,067,253 6,421,173 126.72%

Dec. 31, 2013 16,481,343 14,900,000 90.41%

Dec. 31, 2012 8,799,684 1,785,000 20.28%

Dec. 31, 2011 (2) 6,795,568 695,000 10.23%

June 30, 2011 11,100,622 5,975,000 53.83%

Year's BudgetUtilized in Succeeding

Population

Political Percent ChangeDivision 2010 2000 1990 1980 1970 2010-2000 2010-1970

City 63,024 61,842 61,444 65,047 72,743 0.19% -15.42%

County 634,266 608,975 553,099 556,972 609,266 0.42% 0.39%

State 8,791,894 8,414,350 7,730,188 7,365,011 7,171,112 0.45% 18.43%

Population Density

Political Area inDivision Sq. Miles 2010 2000 1990 1980 1970

City 5.63 11,194 10,992 11,400 12,068 13,496

County 46.69 13,585 13,043 11,915 11,999 13,094

State 7,419.00 1,185 1,134 1,042 993 967

A-18

MAJOR EMPLOYERS

Source: Hudson County Economic Development Corp.

MAJOR REAL PROPERTY TAXPAYERS

Source: The City Tax Assessor.

Employer Nature of Business

Non-Governmental:

Bayonne Medical Center Medical Facility 1,867

Jerhel Plastics Inc Plastic Packaging 500

Gel Spice Company Inc Manufacturer 500

Vertellus Specialty Chemicals 350

Bayonne Community Bank Bank 327

European American Food Group Co. Inc. Food 325

Ideal Window Manufacturing Inc Manufacturer 287

Muralo Company, Inc Manufacturer 250

Inserra, Inc. Supermarket 220

Royal Wine Corporation Kosher Wine Maker 200

2019

EmploymentApproximate

Taxpayer Nature of Business

Bayonne Industries-IMTT Petrochemical

Bayonne Auto Terminal Auto Marine Terminal

Gordon Terminal Service Co. of NJ Petrochemical

Texaco Downstream Properties, Inc Oil

Exxon Corporation Petrochemical

Bayonne Bay Dvlprs Urbn Rnwl, LLC Real estate

NJIND Hook Road, LLC Oil

MPT of Bayonne, LLC Real estate

Buckeye Bayonne Terminal LLC Real estate

South Cove Development, LLC Real estate

Total Real Property Assessed Valuation

Percent of City's Total Taxable Real Property 10.16%

7,294,100

8,000,000

222,362,600$

7,800,000

116,806,400$

23,095,700

13,453,500

12,388,300

12,291,000

9,000,000

2019AssessedValuation

12,233,600

A-19

NET ASSESSED AND EQUALIZED PROPERTY VALUATIONS

Real Property Net Assessed Valuation by Classification

(1) Includes school, municipal, County, State and federal property. (2) Includes private and denominational schools, church and charitable properties, and other exempt properties Source: City's tax duplicates.

Net Assessed and Equalized Property Valuations

(1) Net assessed valuation after deductions permitted under State statutes. (2) As equalized by the County. Source: County of Hudson Abstract of Ratables for years shown.

2019

Classification 2019 2018 2017 2016 2015

Residential 1,380,846,164 1,381,593,664 1,384,354,164 1,390,596,690 1,406,158,490 44.59%

Apartment 106,660,200 104,480,400 103,908,700 103,964,900 105,545,300 3.44%

Commercial 291,908,000 292,234,200 299,304,400 300,027,600 305,031,300 9.43%

Industrial 255,317,600 256,621,000 278,061,700 286,213,100 304,327,300 8.24%

Vacant Land 145,152,400 131,538,000 95,436,100 88,432,300 87,097,400 4.69%

Sub-Total 2,179,884,364 2,166,467,264 2,161,065,064 2,169,234,590 2,208,159,790 70.39%

Exempt Property:

Public (1) 682,180,700 704,990,900 371,531,800 422,024,300 423,758,100 22.03%

Other (2) 234,786,675 228,127,275 566,109,075 559,315,525 540,695,125 7.58%

Total Real Property 3,096,851,739$ 3,099,585,439$ 3,098,705,939$ 3,150,574,415$ 3,172,613,015$ 100.00%

Use Analysis

2019 2018 2017 2016 2015Net Assessed Valuation:

Real Property 2,179,884,364 2,166,467,264 2,161,065,064 2,169,234,590 2,208,159,790

Personal Tangible Property 2,611,677 2,657,878 2,701,273 2,665,905 2,409,518

Total Net Assessed Valuation 2,182,496,041 2,169,125,142 2,163,766,337 2,171,900,495 2,210,569,308

Percent Increase (Decrease)over Previous Year 0.62% 0.25% -0.37% -1.75% -0.49%

Equalized Valuation 6,436,775,677 5,969,390,487 5,502,541,083 5,277,250,128 5,371,056,108

Percent Increase (Decrease)over Previous Year 7.83% 8.48% 4.27% -1.75% 4.64%

A-20

LEVY AND COLLECTION OF TAXES

As of Last Ten Fiscal Years

The levy and collection of taxes are based upon the City's July 1 to June 30 fiscal year, for and through the years ended June 30, 2011, July 1 to December 31 for the six-month transition year and calendar years thereafter. The City is the political entity responsible for the levying and collection of taxes on all taxable real property within its borders, including the tax levies for the County and the City School District.

Property taxes are based on an assessor's valuation of real property and are levied for a calendar year. The taxes for City, City School District and County purposes are combined into one tax levy, which is apportioned on the tax bill by rate and amount for taxpayer information only. Turnover of tax monies by the City to the City School District is based on school needs and is generally made on a periodic basis throughout the year. The City remits 100% of the County taxes, payable quarterly on the 15th days of February, May, August and November.

The City mails tax bills twice a year. The bill for the first two quarters, due on the first days of February and May, is mailed in October of the preceding calendar year. The bill for the final two quarters, due on the first days of August and November, is mailed in June of the current calendar year. Delinquent balances are subject to an interest penalty of 8% on the first $1,500 of the total delinquent amount, and 18% on all delinquent amounts in excess of $1,500. Any account having a delinquent balance in excess of $10,000 at the close of the fiscal year is subject to an additional penalty in the amount of 6% of the total amount of the delinquency. Any unpaid taxes as of June 30 or December 31, dependent on the year end noted above, are subject to tax sale. Any tax liens not purchased by investors revert to the City, and are subsequently subject to foreclosure proceedings to acquire title to the property if the delinquency is not paid promptly thereafter.

Tax Rate Apportionment (Per $1,000 of Assessed Valuation)

(1) Special Improvement District is not included in the Tax Rate as the District only covers certain commercial businesses on

Broadway. Source: The City's 2010-2018 Audited Financial Statements, 2019 Division of Local Government Services – Property Tax Tables.

Year

2019 37.23 12.77 36.29 86.29 5.00

2018 36.24 12.38 35.96 84.58 5.00

2017 35.37 12.41 34.61 82.39 5.00

2016 34.73 12.68 31.94 79.35 5.00

2015 32.07 12.99 31.68 76.74 5.02

2014 30.65 12.42 31.37 74.44 4.96

2013 30.35 12.39 30.65 73.39 4.58

2012 28.53 12.46 30.15 71.14 4.23

2011 28.77 11.44 28.28 68.49 4.23

2010 26.37 11.00 25.51 62.88 4.20

Municipal County School Tax Rate

SpecialImprovement

District (1)

A-21

Tax Levy Apportionment

* 6 month Transition Year

(1) Addition to Local District School Tax. (2) Consists of a levy on merchants in the 27th Street area of Broadway for the improvements to stores. Source: The City’s 2011-2018 Audited Financial Statements, 2019 unaudited financial records. Tax Collection Experience


(1) Includes Special Improvement District Source: 2011-2018 Audited Financial Statements, 2019 unaudited financial records

SpecialAdditional Improvement Tax

Year Municipal County School School (1) District (2) Levy

2019 82,411,735$ 28,059,485$ 68,688,020$ 10,521,000$ 290,000$ 189,970,240$

2018 79,692,304 27,023,585 67,356,978 10,633,000 290,000 184,995,867

2017 77,606,450 27,038,146 64,644,844 10,233,000 290,000 179,812,440

2016 75,965,360 27,615,267 62,025,142 7,337,117 290,000 173,232,886

2015 70,891,756 28,732,549 60,283,361 9,737,000 290,000 169,934,666

2014 68,088,659 27,696,235 59,392,474 10,297,337 290,000 165,764,705

2013 68,263,421 27,878,958 58,810,195 10,142,836 290,000 165,385,410

2012 65,294,134 28,574,165 57,657,055 11,340,706 290,000 163,156,060

2011* 32,022,305 13,438,484 28,543,097 6,450,284 145,000 80,599,170

2011 60,525,380 26,527,183 57,086,193 8,135,513 290,000 152,564,269

DelinquentTax Taxes

Year Levy (1) Amount Percentage Collected Amount Percentage

2019 189,970,240$ 188,952,409$ 99.46% 174,084$ 189,126,493$ 99.56%

2018 184,995,868 183,876,447 99.39% 262,811 184,139,258 99.54%

2017 179,812,441 178,865,576 99.47% 121,478 178,987,054 99.54%

2016 173,232,886 173,040,243 99.89% 413,718 173,453,961 100.13%

2015 169,948,441 169,099,645 99.50% 49,566 169,149,211 99.53%

2014 166,250,146 164,611,053 99.01% 68,683 164,679,736 99.06%

2013 165,793,169 163,980,742 98.91% 240,333 164,221,075 99.05%

2012 163,485,249 161,759,655 98.94% 65,525 161,825,180 98.98%

TY2011* 81,472,499 79,547,559 97.64% 51,653 79,599,212 97.70%

2011 152,564,269 152,262,479 99.80% 470,406 152,732,885 100.11%

Total CollectionCurrent Levy Collection

A-22

Municipal Purpose Tax Collection


(1) Excludes the tax levy for additional school purpose. (2) Net after deductions for County, School District, Additional School District and Special Improvement District tax levies. Source: The City's 2011-2018 Audited Financial Statements, 2019 unaudited financial records. Delinquent Taxes and Tax Liens

Municipal Current Delinquent Total Reserve forPurpose Municipal Tax Municipal Tax Municipal Tax Uncollected

Year Tax Levy (1) Collection (2) Collection Collection Taxes

2019 82,411,735$ 81,393,904$ 174,084$ 81,567,988$ 1,676,212$

2018 79,692,304 78,553,600 262,811 78,816,411 1,740,000

2017 77,606,450 76,659,586 121,478 76,781,064 1,700,000

2016 75,965,360 75,772,717 413,718 76,186,435 1,700,000

2015 71,043,785 70,056,735 49,566 70,106,301 2,600,000

2014 68,574,100 66,935,007 68,683 67,003,690 2,720,000

2013 68,671,180 66,858,753 240,333 67,099,086 3,000,000

2012 65,623,323 63,897,729 65,525 63,963,254 727,000

TY2011* 32,895,634 30,130,694 51,653 30,182,347 840,000

2011 60,525,380 59,353,590 470,406 59,823,996 870,000

Delinquent Tax Title Total Percent ofYear Taxes Liens Delinquent Tax Levy

2019 1,359,569$ 562,652$ 1,922,221$ 1.01%

2018 1,053,069 562,652 1,615,721 0.87%

2017 1,036,505 531,467 1,567,972 0.87%

2016 431,950 501,090 933,040 0.54%

2015 748,057 654,855 1,402,912 0.81%

2014 841,686 617,705 1,459,391 0.86%

2013 241,657 581,664 823,321 0.50%

2012 562,173 546,136 1,108,309 0.67%

TY2011* 402,491 511,697 914,188 0.56%

2011 350,956 495,123 846,079 1.05%

A-23

Tax Title Liens

Foreclosed Property

* 6 month Transition Year Source: The City's 2011 -2018 Audited Financial Statements, 2019 unaudited financial records

Balance Sales & Other BalanceYear Start of Year Transfers Credits End of Year

2019 562,652$ -$ -$ 562,652$

2018 531,467 31,185 - 562,652

2017 501,090 30,377 - 531,467

2016 654,855 29,256 183,021 501,090

2015 617,705 37,150 - 654,855

2014 581,664 36,041 - 617,705

2013 546,136 35,528 - 581,664

2012 511,697 34,439 - 546,136

TY2011* 495,124 16,573 - 511,697

2011 463,859 31,265 - 495,124

Balance, Balance,Year End of Year Year End of Year

2019 6,473,400$ 2014 6,474,000$

2018 6,473,400 2013 6,474,000

2017 6,482,400 2012 6,474,000

2016 6,482,400 TY2011* 8,599,000

2015 6,474,000 2011 8,563,300

A-24

COMPARISON OF MUNICIPAL PURPOSE TAX LEVY TO ANNUAL DEBT SERVICE REQUIREMENT

* 6 month Transition Year (1) Excludes Additional School and Special Improvement District Tax Levies. (2) Excludes School District debt service requirements; but includes principal and interest on borrowing from the Hudson

County Improvement Authority for General Capital. Source: The City's 2011-2018 Audited Financial Statements, 2019 unaudited financial records

DEBT INFORMATION General Information

The State has enacted certain laws and statutes regulating the authorization and issuance of debt by tax levying local governmental units of the State. The statutory gross debt must include all debt authorized plus all debt issued which remains outstanding. Debt, bonds or notes, which have been refunded and payment for which is made from escrowed U.S. Treasury securities or other permitted investments, are considered outstanding under State statutes until such outstanding debt has matured or has been called for redemption. However, any debt which is self-supporting or which is payable from other sources or debt issued for refunding purposes may be deducted from the statutory gross debt to arrive at the amount of statutory net debt. The statutory net debt figure is the amount to determine if a local governmental unit is within the limit of its statutory borrowing power.

The debt incurring capacity is limited by statute to 3.50% of its statutory equalized valuation. The levy of taxes to pay annual debt service requirements is not limited by any State statute or law. Generally, the amount bid for a bond issue may not exceed $1,000 above the principal amount offered for sale and may not be less than the amount offered for bid.

Bond anticipation notes ("BANS") may be issued to temporarily finance a capital improvement or project. BANS may be issued in an amount not exceeding the amount specified in an ordinance, as may be supplemented, less a 5% down payment. BANS may be issued up to or for a one-year period, and may be rolled-over for not exceeding one-year periods. The final maturity of a BAN issue cannot exceed May 1 following the end of the tenth fiscal year from the BANS’ original issue date. Beginning with the third year of issuance, BAN principal must be decreased by an estimated amount of the first maturity of a bond issue.

Percent ofMunicipal (2) Debt ServicePurpose Debt Service to Municipal

Year Tax Levy (1) Requirements Tax Levy

2019 82,411,735$ 13,637,852$ 16.55%

2018 79,692,304 12,311,800 15.45%

2017 77,606,450 13,330,835 17.18%

2016 75,965,360 13,778,030 18.14%

2015 71,153,856 13,163,184 18.50%

2014 68,574,100 12,571,030 18.33%

2013 68,671,180 11,129,098 16.21%

2012 66,116,700 10,370,815 15.69%

TY2011* 32,895,634 8,001,471 24.32%

2011 60,525,380 10,298,585 17.02%

A-25

Tax anticipation notes ("TANS") are limited in amount that may be issued to 30% of the tax levy plus 30% of realized miscellaneous revenue of the next preceding fiscal year, and principal together with interest thereon must be paid in full from the current year's tax collection within three months after the close of the current fiscal year.

Capital notes ("CNS") may be issued in an amount not exceeding $200,000 or 1/2 of 1.00% of the City's equalized

valuation, whichever is greater, for a five-year period. Twenty percent of the principal amount of CNS issued must mature each year and, together with interest due, be paid annually.

Notes issued for temporary financing of an improvement or project may be sold through negotiation. For a more complete description of the above summaries, please refer to N.J.S.A. 40A:2-1 et seq.

Under laws creating authorities, a local governmental unit may enter into a contract or agreement to borrow funds from an authority or, under a deficiency type of agreement, guarantee debt service payments on debt issued by an authority. If a local governmental unit borrows funds from an authority, such borrowing is not included in a local governmental unit's statutory gross debt. If a local governmental unit guarantees all or any part of an authority's outstanding debt, the portion of debt service not payable from an authority's revenues, and which is paid by a local governmental unit, must be included in a local governmental unit's statutory net debt amount (a "deficiency agreement").

The City of Bayonne is in the early stages of possibly acquiring and improving real property for the use as school facilities

(the “Bayonne Education Project”) by the Bayonne Board of Education (the “Bayonne Board of Education”). The cost of the Bayonne Education Project is estimated to be approximately $26,000,000. The undertaking of the Bayonne Education Project and issuance of any obligations for such project is estimated to occur in the Fall of 2020. The payment stream and revenues for any obligations issued for the Bayonne Educations project will be provided by lease payments from the Bayonne Board of Education over approximately thirty (30) years. At this time, the City of Bayonne has not made a final determination as to whether it will issue bonds or notes for the Bayonne Education Project or if such project will be financed by bonds or notes issued by a conduit financing entity. Appropriation Not Required for Payments on Debt

It is not necessary to have an appropriation in order to release money for debt service on obligations. N.J.S.A. 40A:4-57 says "No officer, board, body or commission shall, during any fiscal year, expend money (except to pay notes, bonds or interest thereon), incur any liability, or enter into any contract which by its terms involves the expenditure of money for any purpose for which no appropriation is provided, or in excess of the amount appropriated for such purpose". N.J.S.A.40A:2-4 says "The power and obligation of a local unit to pay any or all of the bonds and notes issued by it pursuant to this chapter, or any act which in this chapter is a revision, shall be unlimited...".

The following schedules set forth information on the City's debt authorized but unissued, debt issued and outstanding, the remaining borrowing capacity and overlapping debt. After the date noted below, the debt information and statistics noted on the following pages may vary from the figures shown because of either a reduction or an increase in the amounts of debt for each of the political entities noted. STATUTORY DEBT As of December 31, 2019 Remaining Borrowing Power

(1) Average of the immediately preceding three years (2019, 2018, 2017.) (2) 3.5% of the Statutory Equalized Valuation as determined by the State. Source: 2019 unaudited annual debt statement

Statutory Equalized Valuation (1) 6,436,775,677$

Statutory Debt Limit (2) 225,287,149$

Statutory Net Debt 162,594,433$

Statutory Borrowing Power 62,692,716$

Net Debt to Equalized Value 2.53%

A-26

TREND OF STATUTORY REMAINING BORROWING POWER

AND TREND OF NET DEBT OUTSTANDING

LAST TEN FISCAL YEARS Statutory Remaining Borrowing Power

Net Debt Outstanding

Bonds outstanding includes debt issued by the Hudson County Improvement Authority (HCIA). Loans outstanding include Green Acres Trust. * 6 month Transition Year (1) Parking Utility Debt calculated to be self-liquidating and is not included in Net Debt. Source: The City's annual debt statements.

RemainingStatutory Authorized StatutoryEqualized Statutory Net Debt but not Borrowing

Year Valuation Debt Limit Outstanding Issued Debt Power

2019 6,436,775,677$ 225,287,149$ 146,597,913$ 21,430,694$ 57,258,541$

2018 5,879,548,723 205,784,205 148,189,096 18,524,746 39,070,363

2017 5,522,860,925 193,300,132 152,227,720 3,899,746 37,172,666

2016 5,339,353,666 186,877,378 151,424,008 7,849,746 27,603,624

2015 5,230,842,993 183,079,505 156,879,014 3,399,230 22,801,261

2014 5,206,569,374 182,229,928 153,069,992 3,399,230 25,760,706

2013 5,360,107,444 187,603,761 169,753,334 5,649,230 12,201,197

2012 5,512,364,667 192,932,763 102,504,335 359,230 90,069,198

TY2011* 5,885,001,025 205,975,036 106,691,358 359,230 98,924,448

2011 6,215,253,093 217,533,858 110,931,354 7,758,153 98,844,351

(1)Bonds Loans Notes Debt Service Pension Net Debt Parking

Year Outstanding Outstanding Outstanding Reserve Refunding Outstanding Utility Debt

2019 123,817,346$ 102,237$ 39,072,000$ 2,333,670$ 14,060,000$ 146,597,913$ 2,040,000$

2018 127,627,836 116,824 35,949,000 1,194,564 14,310,000 148,189,096 2,250,000

2017 109,983,074 144,977 57,800,000 1,190,331 14,510,000 152,227,720 2,455,000

2016 113,095,827 186,292 54,144,000 1,342,111 14,660,000 151,424,008 2,660,000

2015 114,853,257 327,262 58,020,000 1,341,505 14,980,000 156,879,014 2,855,000

2014 114,550,134 466,718 59,625,140 6,322,000 15,250,000 153,069,992 3,020,000

2013 110,158,212 604,677 75,087,041 626,596 15,470,000 169,753,334 3,180,000

2012 98,608,430 741,163 19,401,338 626,596 15,620,000 102,504,335 3,335,000

TY2011* 100,263,299 876,195 21,898,460 626,596 15,720,000 106,691,358 -

2011 101,818,000 991,552 23,991,802 150,000 15,720,000 110,931,354 -

Deduction For

A-27

AUTHORIZED BUT NOT ISSUED DEBT

(As of December 31, 2019)

TEMPORARY DEBT ISSUED AND OUTSTANDING

(As of December 31, 2019)

Source: 2019 unaudited annual financial statement

Ordinance AuthorizedNumber Purpose Amount

General Improvements:

O-99-31 Demolition of Unsafe Buildings 309,213$

O-03-24 Various Capital Improvements 533

O-13-23 Dissolution of BLRA 3,040,000

O-18-52 Aqueduct Improvements 10,700,000

O-19-56 Various Capital Improvements 7,380,948 21,430,694$

Date ofOrdinance Interest Original Date of AmountNumber Purpose Rate Issue Maturity Outstanding

General Improvements

0-13-23 LRA Project Notes 3.196% 07/25/2013 05/22/2020 27,026,000$

0-15-29 Refund Tax Appeals 3.196% 12/22/2015 05/22/2020 846,000

0-16-66 Various Capital Improvements 2.594% 10/19/2017 09/18/2020 4,500,000


0-17-28 Roadway Improvements 2.594% 10/04/2018 09/18/2020 550,000


0-18-52 Aqueduct Improvements 2.000% 10/18/2019 09/18/2020 1,000,000

Temporary Debt Issued and Outstanding 39,072,000$

A-28

PERMANENT DIRECT AND CONTINGENT DEBT ISSUED AND OUTSTANDING

(As of December 31, 2019) Direct Debt

Source: 2019 unaudited annual financial statement.

FinalInterest Issue Maturity AmountRate (%) Date Date Outstanding

General Capital:

Pension Refunding Bonds 5.05-5.68 1/15/03 1/15/33 14,060,000$

Capital Appreciation Bonds 3.55-5.17 7/1/03 7/1/23 1,717,736

HCIA Bonds * 5.00 10/24/08 8/1/25 4,600,000

Special Assessment Bonds 2.25-5.00 11/19/14 11/15/34 4,725,000

General Obligation Refunding Bonds 2.00-5.00 6/10/15 8/1/38 13,775,000

Infrastructure Bonds 2.00-5.00 3/22/16 7/1/39 64,775,000

General Improvement Bonds 2.00-5.00 4/17/18 2/1/29 6,818,000

General Improvement Bonds 2.00-5.00 4/17/18 2/1/48 13,092,000

BMUA Obligations 4.06 12/20/12 12/20/52 254,610

Subtotal 123,817,346

School:

School Refunding Bonds 5.00-5.50 4/1/03 1/15/23 2,185,000

School Bonds (Capital Appreciation Bonds) 4.08-4.97 2/15/03 2/15/22 884,916

School Bonds (Capital Appreciation Bonds) 3.75-4.96 7/3/03 7/1/23 3,682,242

ERIP Bonds 4.11-6.25 5/7/09 6/1/21 2,360,000


School Bonds 2.25-5.00 11/19/14 11/15/34 4,986,000

School Bonds 2.00-3.25 11/19/14 11/15/21 312,000


School Bonds 2.00-4.00 4/19/16 7/1/25 2,140,000

Subtotal 49,035,158

Parking Utility:

Parking Utility Refunding Bonds 2.00-5.00 6/10/15 8/1/27 2,040,000

Subtotal 2,040,000

Total Permanent Direct Bonds 174,892,504$

Purpose

A-29

The Hudson County Improvement Authority The City has entered into several contracts with the Hudson County Improvement Authority (the "HCIA") under the HCIA's Pooled Government Loan Program - a variable interest rate program with interest calculated on a monthly basis. The outstanding balance as of December 31, 2019 is included in the preceding and following tables.

ANNUAL DEBT SERVICE REQUIREMENTS TAX SUPPORTED BONDS

(As of December 31, 2019) Includes Hudson County Improvement Authority (the "HCIA") bonds, with interest rates varying on a monthly basis. For the purpose of preparing this schedule, the interest on the HCIA Bonds was calculated using a 5.00% interest rate.

Source: Bond Amortization Schedules

Total CombinedTotal Total Principal

Principal Interest Principal Interest Principal Interest and Interest

2020 4,159,837$ 6,454,496$ 7,004,122$ 3,555,953$ 11,163,959$ 10,010,449$ 21,174,408$

2021 4,360,001 6,300,837 7,062,981 3,390,632 11,422,982 9,691,469 21,114,451

2022 4,489,944 6,131,629 5,890,629 3,184,587 10,380,573 9,316,216 19,696,789

2023 4,607,955 5,894,223 5,696,426 2,680,140 10,304,381 8,574,363 18,878,744

2024 3,990,000 5,014,540 4,450,000 929,641 8,440,000 5,944,181 14,384,181

2025 6,540,000 4,805,307 4,625,000 748,441 11,165,000 5,553,748 16,718,748

2026 5,235,000 4,453,032 1,185,000 593,541 6,420,000 5,046,573 11,466,573

2027 5,475,000 4,202,033 2,690,000 540,691 8,165,000 4,742,724 12,907,724

2028 5,690,000 3,945,057 2,910,000 442,291 8,600,000 4,387,348 12,987,348

2029 5,938,000 3,675,846 3,115,000 335,754 9,053,000 4,011,600 13,064,600

2030 5,350,000 3,455,904 2,790,000 186,660 8,140,000 3,642,564 11,782,564

2031 5,565,000 3,235,711 385,000 54,098 5,950,000 3,289,809 9,239,809

2032 5,820,000 2,953,634 395,000 41,585 6,215,000 2,995,219 9,210,219

2033 7,690,000 2,658,061 410,000 28,748 8,100,000 2,686,809 10,786,809

2034 6,710,000 2,334,406 426,000 14,910 7,136,000 2,349,316 9,485,316

2035 6,740,000 2,014,701 - - 6,740,000 2,014,701 8,754,701

2036 7,095,000 1,688,834 - - 7,095,000 1,688,834 8,783,834

2037 7,485,000 1,344,015 - - 7,485,000 1,344,015 8,829,015

2038 7,905,000 979,965 - - 7,905,000 979,965 8,884,965

2039 7,315,000 595,365 - - 7,315,000 595,365 7,910,365

2040 510,000 231,615 - - 510,000 231,615 741,615

2041 530,000 208,215 - - 530,000 208,215 738,215

2042 550,000 183,915 - - 550,000 183,915 733,915

2043 575,000 158,603 - - 575,000 158,603 733,603

2044 595,000 132,278 - - 595,000 132,278 727,278

2045 620,000 104,940 - - 620,000 104,940 724,940

2046 645,000 76,478 - - 645,000 76,478 721,478

2047 675,000 46,778 - - 675,000 46,778 721,778

2048 702,000 15,795 - - 702,000 15,795 717,795 2052 254,610 - - - 254,610 - 254,610

Total 123,817,346$ 73,296,211$ 49,035,158$ 16,727,672$ 172,852,504$ 90,023,883$ 262,876,387$

City (General Capital) School

A-30

State Loans On February 7, 2006, the City borrowed an additional $271,000 in two loans from the State under the Green Acres Loan program to fund improvements to the 16th Street Boat Ramp. Under the terms of these loans, the City makes semi-annual principal and interest payments for the Green Acres loans, until the final maturity dates as noted below. The outstanding balances as of December 31, 2019 are as follows:

DIRECT AND OVERLAPPING DEBT ISSUED AND OUTSTANDING

As of December 31, 2019 (Except as noted below)

(1) The County of Hudson's gross and net debt at December 31, 2019 was $917,933,342 and $488,713,143, respectively, per the unaudited Annual Debt Statement of the County. The City's share (7.27%) is based on the City's percentage of the total county taxes apportioned for 2019 per the 2019 Abstract of Ratables.

(2) This figure represents 7.27% of the HCIA's audited gross debt at December 31, 2018 of $536,451,543. Source: As noted above.

DEBT RATIOS

(1) Based on 2010 Federal Census (63,024). (2) As equalized for year 2019 by the City ($6,436,775,677).

FinalInterest Issue Maturity AmountRate (%) Date Date Outstanding

Green Acres, State Loan:

16 th Street Boat Ramp 2.00 2/7/06 2/9/26 64,512$

16 th Street Boat Ramp 2.00 2/7/06 2/10/26 37,725

Total 102,237$

Purpose

Gross Net Gross Net

Direct Debt:

General 177,048,586$ 160,654,916$ 177,048,586$ 160,654,916$

Utility 2,149,400 -0- 2,149,400 -0-

School 52,735,158 -0- 52,735,158 -0-

Overlapping Debt:

Hudson County (1) n/a n/a 66,777,000 35,552,470

HCIA (2) n/a n/a 39,000,027 39,000,027

231,933,144$ 160,654,916$ 337,710,171$ 235,207,413$

Direct and Overlapping DebtDirect Debt

Gross Net Gross Net

Per Capita (1) 3,680$ 2,549$ 5,358$ 3,732$

Equalized Valuation (2) 3.60% 2.50% 5.25% 3.65%

Direct and Overlapping DebtDirect Debt

APPENDIX B

CITY OF BAYONNE FINANCIAL STATEMENTS AS OF

DECEMBER 31, 2019 (UNAUDITED) AND AS OF DECEMBER 31, 2018 (AUDITED)

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CITY OF BAYONNE COUNTY OF HUDSON, NEW JERSEY

COMPILED FINANCIAL STATEMENTS

FOR THE UNAUDITED YEAR ENDED DECEMBER 31, 2019

(with Audited 2018 Financial Statements for Comparative Purposes)

DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants

310 Broadway Bayonne, NJ 07002

(201) 437-9000 Fax: (201) 437-1432

E-Mail: [email protected]

Robert A. Gironda, CPA Linda P. Kish, CPA, RMA Robert G. Doria, CPA (N.J. & N.Y.) Mark W. Bednarz, CPA, RMA Frederick J. Tomkins, CPA, RMA Jason R. Gironda, CPA Matthew A. Donohue, CPA Mauricio Canto, CPA, RMA

INDEPENDENT ACCOUNTANT’S COMPILATION REPORT

The Honorable Mayor and Members of the City Council City of Bayonne, New Jersey Management is responsible for the accompanying financial statements of the City of Bayonne, New Jersey (the “City”) which comprise the balance sheet – regulatory basis, of each fund as of December 31, 2019, and the statement of operations and changes in fund balance – regulatory basis, statement of revenues – regulatory basis and statement of appropriations – regulatory basis, of the Current and Parking Utility Operating Funds, and the related statement of changes in Fund Balance – regulatory basis, of the General Capital and Parking Utility Capital Funds, which collectively comprise the City’s basic financial statements. We have performed the compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the 2019 financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements. The financial statements are prepared in accordance with the financial reporting provisions of the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the “Division”), which is a basis of accounting other than accounting principles generally accepted in the United States of America. The 2018 financial statements were audited by us, and we expressed a qualified opinion on them in accordance with the financial reporting provisions of the Division as described above in our report dated September 5, 2019.

Management has elected to omit substantially all of the disclosures ordinarily included in financial statements prepared in accordance with the financial reporting provisions of the Division. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the City’s assets, liabilities, fund balance, revenues and expenditures. Accordingly, the financial statements are not designed for those who are not informed about such matters.

Bayonne, New Jersey April 21, 2020

DONOHUE, GIRONDA, DORIA & TOMKINS, LLC

Certified Public Accountants

MARK W. BEDNARZ

RMA No. 547

Exhibit ASheet 1 of 2

CITY OF BAYONNECURRENT FUND

AS OF DECEMBER 31, 2019 (Unaudited) AND 2018 (Audited)

COMPARATIVE BALANCE SHEET - REGULATORY BASIS

2019 2018(Unaudited) (Audited)

Assets

Current Fund:Cash and Cash Equivalents 39,978,263$ 44,007,640$ Cash - Change Funds 950 950

Subtotal 39,979,213 44,008,590 Intergovernmental Receivable:

State Aid 2,600,891 2,443,267 42,580,104 46,451,857

Receivables and Other Assets with Full Reserves:Delinquent Property Taxes 1,359,569 1,053,069 Tax Title Liens 562,652 562,652 Property Acquired for Taxes at Assessed Valuation 6,473,400 6,473,400 Due from Bulk Levy Purchaser 398,815 - Revenue Accounts Receivable 2,466,185 1,120,785 Interfunds Receivable 16 800,297

Total Receivables with Full Reserve 11,260,637 10,010,203

Deferred Charges:Revaluation 747,890 - Loans Payable-Prior Year 104,239 104,239 Tax Map 130,290 173,720

Total Deferred Charges 982,419 277,959

Total Current Fund Assets 54,823,160 56,740,019

Federal and State Grant Fund:Federal and State Grants Receivable 15,755,820 3,834,501 Due from Current Fund 2,295,215 1,301,143

Total Federal and State Grant Fund Assets 18,051,035 5,135,644

Total Assets 72,874,195$ 61,875,663$

See Independent Accountant's Compilation Report

Exhibit ASheet 2 of 2





Liabilities, Reserves and Fund Balance

Current Fund:Appropriation Reserves 5,414,200$ 5,215,340$ Encumbrances 1,434,061 935,042 Contracts Payable 422,107 305,934 Special Emergency Notes Payable 747,890 - Interfunds Payable 4,784,667 1,393,026 Prepaid Tax Cost Sale 33,016 20,000 Due to State of New Jersey:

Veteran and Senior Citizen Deductions 82,251 65,756 Tax Overpayments 2,164,927 3,595,966 Prepaid Taxes 857,174 794,576 Due County for Added and Omitted Taxes 198,466 183,864 Special Improvement District Taxes Payable 621,319 630,091 Reserve for Other 1,710,785 1,214,094 Reserve for Urban Enterprise Funds 3,097,726 3,782,206

21,568,589 18,135,895 Reserve for Receivables 11,260,637 10,010,203 Fund Balance 21,993,934 28,593,921

Total Current Fund Liabilities, Reserves and Fund Balance 54,823,160 56,740,019

Federal and State Grant Fund: Encumbrances Payable 1,161,790 523,441 Reserve for Federal and State Grants:

Appropriated 16,222,070 4,339,695 Unappropriated 667,175 272,508

Total Federal and State Grant Fund Liabilities and Reserves 18,051,035 5,135,644

Total Liabilities, Reserves and Fund Balance 72,874,195$ 61,875,663$


Exhibit A-1Sheet 1 of 2


FOR THE YEARS ENDED DECEMBER 31, 2019 (Unaudited) AND 2018 (Audited)

COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE


Revenue and Other Income Realized:Fund Balance Utilized 14,408,000$ 12,500,000$ Miscellaneous Revenue Anticipated 45,910,539 60,566,898 Receipts from Delinquent Taxes 174,084 262,811 Receipts from Current Taxes 190,628,621 185,598,102 Non-Budget Revenues 4,604,880 1,070,721 Other Credits to Income:

Unexpended Balance of Appropriation Reserves 1,805,726 1,362,216 Cancellation of Tax Overpayments 1,808,371 - Prior Year Revenue Accounts Receivable Realized 1,120,785 1,026,285 Prior Year Interfunds Returned 800,297 80,332 Grant Reserves Cancelled 85,443 219,196 Miscellaneous Adjustments 36,552 30,535 Write off Old Outstanding Checks 35,947 - Dog License Trust Fund Statutory Excess - 11,490

261,419,245 262,728,586

ExpendituresBudgetary and Emergency Appropriations:

Appropriations within "CAPS"Operations

Salaries and Wages 59,212,977 59,317,700 Other Expenses 33,897,848 35,051,156

Statutory Expenditures 17,538,052 16,053,800 Appropriations Excluded from "CAPS"

OperationsSalaries and Wages - 200,972 Other Expenses 16,793,283 4,789,251

Capital Improvements 1,100,000 100,000 Municipal Debt Service 13,580,650 12,311,801 Deferred Charges 43,430 43,430 Type 1 School District Debt 10,520,043 10,621,506 Reserve for Uncollected Taxes 1,676,212 1,740,000

154,362,495 140,229,616





COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE


Expenditures (Continued)County Tax 28,073,148$ 27,023,585$ Local District School Tax 68,688,020 67,356,978 Special Improvement District Tax 290,000 290,000 Interfunds Advanced Originating in Current Year 16 800,297 Revenue Account Receivables Reserved 2,466,185 1,120,785 Other Receivables Reserved 398,815 - Grants Receivable Cancelled 80,443 224,783

254,359,122 237,046,044

Excess in Revenue 7,060,123 25,682,542

Adjustments to Income before Fund Balance:Expenditures Included Above Which are by StatuteDeferred Charges to Budget of Succeeding Year

Special Emergency AppropriationsTax Maps 747,890 -

Statutory Excess to Fund Balance 7,808,013 25,682,542

Fund Balance, January 1 28,593,921 15,411,379 36,401,934 41,093,921

Decreased by:Utilized as Anticipated Revenue 14,408,000 12,500,000

Fund Balance, December 31 21,993,934$ 28,593,921$




FOR THE YEAR ENDED DECEMBER 31, 2019 (Unaudited)

STATEMENT OF REVENUES

Adopted N.J.S.A. Excess orBudget 40A:4-87 Realized (Deficit)

SURPLUS:Surplus Anticipated 14,408,000$ -$ 14,408,000$ -$

MISCELLANEOUS REVENUES:LOCAL REVENUES

Licenses:Alcoholic Beverage 74,400 - 78,164 3,764 Other 171,200 - 154,623 (16,577)

Fees and Permits 1,479,450 - 1,080,251 (399,199) Fines and Costs - Municipal Court 2,138,500 - 2,229,266 90,766 Interest and Costs on Taxes 372,800 - 431,710 58,910 Interest on Investments and Deposits 84,000 - 108,208 24,208 Rents - City Owned Property 153,495 - 135,981 (17,514) Verizon Franchise Fee 300,960 - 287,717 (13,243) Payments in Lieu of Taxes:

Bayonne Housing Authority 312,590 - 894,763 582,173 Senior Horizons of Bayonne 49,889 - 51,475 1,586 Southshore Village Housing/Post Road Gardens 54,850 - 54,850 - Costco 250,000 - 250,000 - Barnabas Bayonne 346,498 - 614,173 267,675 Alexan City View 1,065,378 - 1,055,639 (9,739) Platty Kill Manor 180,000 - 210,000 30,000 Bayonne CommunityAction 10,911 - 12,158 1,247 Bayonne Energey Cener Urban Renewal I 1,588,445 - 1,131,767 (456,678) Bayonne Energey Cener Urban Renewal II 514,675 - 381,361 (133,314) Prince Holdings 310,000 - 310,000 - 195 East 22nd Street Urban Renewal 60,000 - 22,236 (37,764) Silklofts 193,800 - 197,676 3,876 Tagliareni Building 23,648 - 24,558 910 Port Authority 103,766 - 103,766 - Port Authority/Workbench 402,240 - 402,240 - Port Authority/Global Auto Marine Terminal 1,106,469 - 1,106,469 - Port Authority of New York & New Jersey 368,653 - 368,653 -

Five Year PILOTS 540,568 - 603,793 63,225 12,257,185 - 12,301,497 44,312

STATE AID WITHOUT OFFSETTING APPROPRIATIONSConsolidated Municipal Property Tax Relief Act 1,214,873 - 1,214,873 - Energy Receipts Tax (PL 1997, Ch. 162 & 167) 7,614,928 - 7,614,928 -

8,829,801 - 8,829,801 -

SHARED SERVICE AGREEMENTSBayonne BOE Garbage Removal Contract 52,000 - 52,000 -

52,000 - 52,000 -

PUBLIC AND PRIVATE REVENUESEmergency Management Assistance 10,000 10,000 20,000 - Cooperative Marketing Grant 9,300 - 9,300 - Congregate Meals Program 393,028 88,500 481,528 - Custom Border Patrol 56,593 - 56,593 - Municipal Alliance Grant 54,448 - 54,448 - Older American Act of 1965 Title III 48,461 49,317 97,778 - Recreation Opportunities for Individuals with Disabilties - 20,000 20,000 - Police Overtime - DMV 97,875 - 97,875 - Drunk Driving Enforcement Fund 4,493 - 4,493 -






Adopted N.J.S.A. Excess orBudget 40A:4-87 Realized (Deficit)

PUBLIC AND PRIVATE REVENUES (continued)Body Armor Fund -$ 16,364$ 16,364$ -$ State Local Housing Inspection Program 26,354 52,500 78,854 - UASI Grant CY2019 - 110,204 110,204 - UASI Training Fire Department 8,825 - 8,825 - Recycling Tonnage Grant 99,119 - 99,119 - Pedestrian Safety Grant 30,000 - 30,000 - Drive Sober Holiday Crackdown 5,500 - 5,500 - Drive Sober Or Get Pulled Over - 5,500 5,500 - Distracted Driving Statewide Crackdown Gran - 5,500 5,500 - GTC Bayonne - Donation Fire 72,763 - 72,763 - Municipal Aid Program 840,760 - 840,760 - Local Freight Impact Fund (LFIF) - 6,350,000 6,350,000 - Port Security Grant - 18,750 18,750 - Port Authority Grant - 2,000,000 2,000,000 - Safe Streets Grant - 205,000 205,000 - Clean Communities Grant - 98,761 98,761 - Multi Park Green Acres Grant - 1,000,000 1,000,000 - Green Acres Grant Program - 1,000,000 1,000,000 - Green Acres Program - ONRR Grant - 900,013 900,013 - Hazardous Discharges Site Remedetion Fund - 52,566 52,566 - Open Space Grant - 28th Street Park - 250,000 250,000 - Open Space Grant - Russell Golding Park - 500,000 500,000 -

1,757,519 12,732,975 14,490,494 -

OTHER SPECIAL ITEMSUniform Fire Safety Act 239,575 - 134,982 (104,593) PVSC Municipal Rebate Incentive Program 40,745 - 40,745 - Debt Service Reimbursement - Bayonne BOE 42,500 - 42,500 - Royal Caribbean Cruise Port 2,399,874 - 996,400 (1,403,474) Debt Service Reimbursement - Empire Golf 310,000 - 310,000 - Indirect Cost Reimbursement - UCC 257,462 - 257,462 - Uniform Fire Code Inspection Fees 138,675 - 135,926 (2,749) Parking Tax 892,605 - 949,399 56,794 Spectra Energy 1,815,405 - 1,805,553 (9,852) Port Authority Land Payment 5,000,000 - 5,000,000 - Reimbursement City Wide Communications System 5,890 - 9,988 4,098 BMUA Expense Reimbursement 444,170 - 553,792 109,622

11,586,901 - 10,236,747 (1,350,154)

Total Miscellaneous Revenues 34,483,406 12,732,975 45,910,539 (1,305,842)

RECEIPTS FROM DELINQUENT TAXES: 272,785 - 174,084 (98,701)

Subtotal - General Revenues 49,164,191$ 12,732,975$ 60,492,623$ (1,404,543)$

AMOUNT TO BE RAISED BY TAXES FOR SUPPORT OF MUNICIPAL BUDGET:Local Tax Incl. Reserve for Uncollected Taxes 79,137,817 - 80,939,672 1,801,855 Minimum Library Tax 10,521,000 - 10,521,000 - Addition to Local District School Tax 2,116,781 - 2,116,781 -

Total Amount to be Raised by Taxes 91,775,598 - 93,577,453 1,801,855

Total Budget Revenues 140,939,789 12,732,975 154,070,076 397,312

Non-Budget Revenues - - 4,604,880 4,604,880

Total General Revenues 140,939,789$ 12,732,975$ 158,674,956$ 5,002,192$


Exhibit A-2a



STATEMENT OF REVENUES -ANALYSIS OF BUDGETED REVENUES

Allocation of Current Tax Collections:Current Year Taxes Collected in Prior Year 794,576$ Current Year Taxes Collected in Current Year 186,882,893 Homestead Rebate 1,047,014 State Share of Sr. Citizens' & Veterans' Deductions 227,926 Current Taxes Realized in Cash 188,952,409$ Add: Appropriation for "Reserve for Uncollected Taxes" 1,676,212

190,628,621 Allocated to:

School Taxes 68,688,020 County Taxes 28,073,148 Special Improvement District Taxes 290,000

Total Allocated to School, County and Special District Taxes 97,051,168

Amount for Support of Municipal Budget Appropriations 93,577,453

Receipts from Delinquent Taxes: 174,084

Miscellaneous Revenues Anticipated:Accrual per Revenue Accounts Receivable 48,868,762 State Aid 8,829,801 State and Federal Grants 14,490,494

Total Miscellaneous Revenues Anticipated 45,910,539

FUND BALANCE 14,408,000

Total Realized Budget Revenues 154,070,076$


Exhibit A-2b

Miscellaneous Revenue not Anticipated:Sale of Municipal Assets 2,610,000$ Bayonne Developer Urban Renewal Pilot 950,000 Harbor Station North Pilot 403,750 Tax Levy Premium 356,001 160 E 22nd St. Ure Pilot 99,375 Winter Storm Jonas 44,859 Hurricane Florence 39,050 Miscellaneous 22,910 Reimbursement of Police Salaries 21,351 Vendor refunds 17,994 Hurrican Dorian 16,973 Pilot Initial deposits 10,000 Reimbursement of Fire Salaries 4,437 Homestead Rebate Mailing 2,726 Prisoner Forfeit Cash 1,346 NJ Turnpike- Fire S&W 1,080 Reimbursement of Public Works Salaries 960 Reimbursement of Fire Expenses 929 Restitution 416 Animal Cruelty Fines 362 LRA 2009 Debt Service 224 Cashier Unallocated 137

4,604,880$



STATEMENT OF REVENUES -ANALYSIS OF NON-BUDGET REVENUES



Appropriations ExpendedAdopted Budget After Paid orBudget Modification Charged Encumbered Reserved Cancelled

(A) Operations - within "CAPS"Office of the Mayor

Salaries and Wages 330,000$ 285,000$ 268,391$ -$ 16,609$ -$ Other Expenses 14,000 14,000 8,734 721 4,545 -

Planning BoardOther Expenses 45,000 45,000 15,580 3,048 26,372 -

Board of AdjustmentOther Expenses 28,000 28,000 14,630 4,838 8,532 -

Alcohol Beverage ControlOther Expenses 1,000 1,000 - - 1,000 -

Environmental CommissionOther Expenses (N.J.S.A. 40:56A-1) 1,000 1,000 - - 1,000 -

Rent Control OfficeSalaries and Wages 15,000 15,000 7,722 - 7,278 - Other Expenses 19,000 19,000 5,270 3,605 10,125 -

Planning and ZoningSalaries and Wages 447,000 417,000 402,617 - 14,383 - Other Expenses 15,000 15,000 14,950 (8) 58 -

City Clerk & Municipal CouncilMunicipal Council Salaries and Wages 168,000 169,000 166,641 - 2,359 -

Other Expenses 4,000 4,000 2,174 79 1,747 - City Clerk's Office

Salaries and Wages 331,000 353,500 350,303 - 3,197 - Other Expenses 34,000 49,000 23,629 134 25,237 -

Primary, General & Municipal ElectionsSalaries and Wages 25,000 25,000 16,831 - 8,169 - Other Expenses 53,000 53,000 49,143 - 3,857 -

Budget & Accounting Fees 89,000 89,000 75,000 - 14,000 -

Department of AdministrationBusiness Administrator's Office Salaries and Wages 560,000 560,000 551,603 - 8,397 -

Other Expenses 825,000 1,005,000 883,897 79,576 41,527 - Finance Office

Salaries and Wages 955,000 990,000 982,556 - 7,444 - Other Expenses 75,000 85,000 69,539 9,781 5,680 -

Tax AssessorSalaries and Wages 356,000 326,000 310,744 - 15,256 - Special Emergency: Revaluation - 747,890 747,890 - - -

Collection of TaxesSalaries and Wages 262,000 273,000 272,336 - 664 - Postage 90,000 100,000 89,323 - 10,677 -

Personnel Department Salaries and Wages 92,000 92,000 91,839 - 161 - Bayonne Historical Commission

Other Expenses 6,000 6,000 500 - 5,500 -

Law DepartmentSalaries and Wages 722,000 692,000 680,273 - 11,727 - Other Expenses 40,000 45,000 32,187 1,567 11,246 - Contracts 160,000 160,000 86,608 28,392 45,000 -

Municipal Services DepartmentWater/Sewer Division


Board of HealthSalaries and Wages 355,000 400,000 398,319 - 1,681 - Other Expenses 331,388 331,388 277,204 54,184 - -

Bayonne Health CenterOther Expenses 4,000 4,000 - - 4,000 -

Older American Program 256,000 256,000 254,327 1,673 - -

Department of Public SafetyPolice - Uniform Personnel

Salaries and Wages 21,525,000 21,525,000 20,565,560 - 959,440 - Other Expenses 855,000 855,000 757,414 38,571 59,015 -

Police - Non-Uniform PersonnelSalaries and Wages 3,200,000 3,200,000 3,150,660 - 49,340 - Other Expenses 12,000 12,000 3,283 - 8,717 -

STATEMENT OF APPROPRIATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019 (Unaudited)CURRENT FUND

CITY OF BAYONNE






CITY OF BAYONNE

Fire - Non-Uniform PersonnelSalaries and Wages 200,000$ 181,500$ 158,357$ -$ 23,143$ -$ Other Expenses 445,000 455,000 408,745 40,072 6,183 -

Fire - Uniform PersonnelSalaries and Wages 20,589,977 20,589,977 20,126,397 - 463,580 - Uniform Fire Safety Act 115,070 115,070 115,070 - - -

Prosecutor's OfficeOther Expenses 70,000 70,000 58,500 11,400 100 -

Department of Public Works Streets and Road Maintenance


Snow RemovalSalaries and Wages 105,000 105,000 76,483 - 28,517 - Other Expenses 110,000 110,000 62,254 6,195 41,551 -

Other Public WorksSalaries and Wages 457,000 462,000 440,476 - 21,524 - Other Expenses 300,000 300,000 243,526 56,145 329 -

Buildings and GroundsSalaries and Wages 1,100,000 1,030,000 999,641 - 30,359 - Other Expenses 280,000 375,000 265,881 24,936 84,183 -

Vehicle MaintenanceSalaries and Wages 625,000 632,000 617,895 - 14,105 - Other Expenses 495,000 495,000 392,170 61,112 41,718 -

Swimming PoolSalaries and Wages 133,000 133,000 119,779 - 13,221 - Other Expenses 48,000 48,000 44,934 2,007 1,059 -

Parks & Playgrounds - RecreationalSalaries and Wages 1,435,000 1,322,000 1,292,303 - 29,697 - Other Expenses 135,000 135,000 100,040 584 34,376 -

Maintenance of ParksSalaries and Wages 3,200,000 3,277,000 3,268,345 - 8,655 - Other Expenses 100,000 100,000 69,352 11,747 18,901 -

Municipal CourtSalaries and Wages 1,053,000 1,032,000 985,632 - 46,368 - Other Expenses 80,000 101,000 81,297 1,690 18,013 -

Public DefenderOther Expenses 70,000 81,000 72,867 5,833 2,300 -

Insurance:General Liability / Workers Compensation 2,750,000 2,500,000 1,940,000 210,000 350,000 - Employee Group Health 14,950,000 14,950,000 13,624,829 - 1,325,171 - Group Insurance Waiver Costs 111,000 112,000 111,000 - 1,000 -

Unclassified:Solid Waste Disposal 4,205,000 4,205,000 3,548,069 431,000 225,931 - Solid Waste Collection 2,755,000 2,755,000 2,504,584 227,000 23,416 - Gasoline, Oil, Grease, Etc. 358,000 358,000 280,790 113 77,097 - Telephone Expenses 145,000 145,000 134,221 349 10,430 - Utilities 1,600,000 1,600,000 1,438,518 13,851 147,631 - Celebration of Public Holidays 44,000 44,000 44,000 - - - Ground Restoration Funds - - - - - - Reserve for Tax Appeals 500,000 500,000 - - 500,000 - Bulk Levy Sale Expenses 15,000 15,000 8,062 - 6,938 - Bayonne Economic Opportunity Foundation 22,500 22,500 22,500 - - -

(B) Contingent 1,000 1,000 - - 1,000 - 92,362,935 93,110,825 86,666,933 1,395,671 5,048,221 -

Detail:Salaries and Wages 59,340,977 59,212,977 57,416,836 - 1,796,141 - Other Expenses 33,021,958 33,897,848 29,250,097 1,395,671 3,252,080 -






CITY OF BAYONNE

(E) Deferred Charges & Statutory Expenditures within "CAPS" (2) STATUTORY EXPENDITURESContribution to:

Public Employees Retirement System 2,473,727$ 2,473,727$ 2,403,589$ -$ 70,138$ -$ Social Security System (O.A.S.I.) 2,025,000 2,025,000 1,923,414 - 101,586 - Consolidated Police & Firemen's Pension Fund 20,000 20,000 19,037 - 963 - Police & Fire Retirement System of NJ 12,922,325 12,922,325 12,922,325 - - - Unemployment Insurance 24,000 24,000 24,000 - - - Defined Contribution Retirement Program 45,000 45,000 28,145 - 16,855 - Pensioners & Widow(er)s 28,000 28,000 26,365 - 1,635 -

17,538,052 17,538,052 17,346,875 - 191,177 - (H-1)TOTAL GENERAL APPROPRIATIONSFOR MUNICIPAL PURPOSES WITHIN "CAPS" 109,900,987 110,648,877 104,013,808 1,395,671 5,239,398 -

(A) Operations - Excluded From "CAPS"GENERAL GOVERNMENT

Free Public Library 2,116,781 2,116,781 1,955,588 38,391 122,802 - 2,116,781 2,116,781 1,955,588 38,391 122,802 -

SHARED SERVICE AGREEMENTSBayonne BOE Garbage Removal Contract 52,000 52,000 - - 52,000 -

52,000 52,000 - - 52,000 -

PUBLIC AND PRIVATE APPROPRIATIONSOFFSET BY REVENUES

Emergency Management Assistance 20,023 20,023 20,023 - - - Emergency Management Assistance - 10,000 10,000 - - - Cooperative Marketing Grant 9,300 9,300 9,300 - - - Congregate Meals Program 491,286 579,786 579,786 - - - Custom Border Patrol 56,593 56,593 56,593 - - - Municipal Alliance Grant 68,060 68,060 68,060 - - - Older American Act of 1965 Title III 60,576 109,893 109,893 - - - Recreation Opportunities for Individuals with Disabilties - 20,000 20,000 - - - Police Overtime - DMV 97,875 97,875 97,875 - - - Drunk Driving Enforcement Fund 4,493 4,493 4,493 - - - Body Armor Fund - 16,364 16,364 - - - State Local Housing Inspection Program 26,354 78,854 78,854 - - - UASI Grant CY2019 - 110,204 110,204 - - - UASI Training Fire Department 8,825 8,825 8,825 - - - Recycling Tonnage Grant 99,119 99,119 99,119 - - - Pedestrian Safety Grant 30,000 30,000 30,000 - - - Drive Sober Holiday Crackdown 5,500 5,500 5,500 - - - Drive Sober Or Get Pulled Over - 5,500 5,500 - - - Distracted Driving Statewide Crackdown Gran - 5,500 5,500 - - - GTC Bayonne - Donation Fire 72,763 72,763 72,763 - - - Municipal Aid Program 840,760 840,760 840,760 - - - Local Freight Impact Fund (LFIF) - 6,350,000 6,350,000 - - - Port Security Grant - 18,750 18,750 - - - Port Authority Grant - 2,000,000 2,000,000 - - - Safe Streets Grant - 205,000 205,000 - - - Clean Communities Grant - 98,761 98,761 - - - Multi Park Green Acres Grant - 1,000,000 1,000,000 - - - Green Acres Grant Program - 1,000,000 1,000,000 - - - Green Acres Program - ONRR Grant - 900,013 900,013 - - - Hazardous Discharges Site Remedetion Fund - 52,566 52,566 - - - Open Space Grant - 28th Street Park - 250,000 250,000 - - - Open Space Grant - Russell Golding Park - 500,000 500,000 - - -

1,891,527 14,624,502 14,624,502 - - -

Total Operations - Excluded from "CAPS" 4,060,308 16,793,283 16,580,090 38,391 174,802 -

Detail:

Other Expenses 4,060,308 16,793,283 16,580,090 38,391 174,802 -

(C) Capital Improvements- Excluded From "CAPS"Capital Improvement Fund 1,100,000 1,100,000 1,100,000 - - -

1,100,000 1,100,000 1,100,000 - - -






CITY OF BAYONNE

(D) Municipal Debt ServiceBond Principal 3,831,000$ 3,831,000$ 3,824,746$ -$ -$ 6,254$ Bond Anticipation and Capital Notes 1,352,000 1,352,000 1,352,000 - - - Interest on Bonds 6,602,000 6,602,000 6,592,345 - - 9,655 Interest on Notes 1,144,000 1,144,000 1,102,707 - - 41,293 Green Trust Loan Program

Loan Repayments for Principal and Interest 16,852 16,852 16,852 - - - Capital Lease Obligations 692,000 692,000 692,000 - - -

13,637,852 13,637,852 13,580,650 - - 57,202

(E) Deferred ChargesSpecial Emergency Authorizations

5 Year - Emergency for Tax Maps 43,430 43,430 43,430 - - - 43,430 43,430 43,430 - - -

(H-2) TOTAL GENERAL APPROPRIATIONS FORMUNICIPAL PURPOSES - EXCLUDED FROM "CAPS" 18,841,590 31,574,565 31,304,170 38,391 174,802 57,202

(I) Local District School Purposes - Excluded from "CAPS"TYPE 1 DISTRICT SCHOOL DEBT

Payment of Bond Principal 6,796,000 6,796,000 6,795,597 - - 403 Interest on Bonds 3,725,000 3,725,000 3,724,446 - - 554

10,521,000 10,521,000 10,520,043 - - 957 (O) TOTAL GENERAL APPROPRIATIONS - EXCLUDED FROM "CAPS" 29,362,590 42,095,565 41,824,213 38,391 174,802 58,159

(L) Subtotal General Appropriations 139,263,577 152,744,442 145,838,021 1,434,062 5,414,200 58,159

(M) Reserve for Uncollected Taxes 1,676,212 1,676,212 1,676,212 - - -

TOTAL GENERAL APPROPRIATIONS 140,939,789$ 154,420,654$ 147,514,233$ 1,434,062$ 5,414,200$ 58,159$

Budget As Adopted 140,939,789$ Added by N.J.S.A. 40A:4-87 12,732,975 Special Emergency 747,890

154,420,654 Less: Appropriations Cancelled 58,159

154,362,495$

Reserve for Uncollected Taxes 1,676,212$ Reimbursed from Trust Fund (98,007) Cash Receipts (257,920) Unemployment Appropriation - Trust Fund 24,000 Reserve for Tax Appeals - Deferred Charges 43,430 Qualified Bonds Paid by State 7,143,589 Capital Improvement Fund 1,100,000 State and Federal Grants - Matching Funds 134,008 State and Federal Grants 14,490,494 Cash Disbursements 123,258,427

Subtotal: General Appropriations Budgeted and Paid or Charged 147,514,233$


Exhibit BSheet 1 of 2

CITY OF BAYONNETRUST FUND




Assets

Animal Control Fund:Cash and Cash Equivalents 46,867$ 60,481$

Insurance Fund:Cash and Cash Equivalents 1,122,227 880,037

Tax Lien Redemption Fund:Cash and Cash Equivalents 247,620 282,229 Interfunds Receivable 5,788 -

253,408 282,229

Housing and Urban Development Fund:Cash and Cash Equivalents 28,442 3,850 Grants Receivable 1,155,788 2,664,167

1,184,230 2,668,017

Other Trust Fund:Cash and Cash Equivalents 13,523,336 15,015,775 Interfunds Receivable 97,910 -

13,621,246 15,015,775

Total Assets 16,227,978$ 18,906,539$


Exhibit BSheet 2 of 2

CITY OF BAYONNETRUST FUND





Animal Control Fund:Interfunds Payable -$ 28,392$ Due to State of New Jersey 513 513 Reserve for Dog Fund Expenditures 46,354 31,576

46,867 60,481

Insurance Fund:Interfunds Payable 16 - Reserve for Insurance Fund Expenditures 1,122,211 880,037

1,122,227 880,037

Tax Lien Redemption Fund:Reserve for Tax Lien Redemption Fund Expenditures 253,408 282,229

Housing and Urban Development Fund:Interfunds Payable - 163,400 Reserve for Grant Expenditures 1,184,230 2,493,417

1,184,230 2,656,817

Other Trust Fund:Interfunds Payable 39,924 597,812 Due to State of New Jersey 49,412 61,720 Accounts Payable 112,406 108,213 Reserve for Other Expenditures 13,419,504 14,248,030

13,621,246 15,015,775

Total Liabilities and Reserves 16,227,978$ 18,895,339$


Exhibit C

CITY OF BAYONNEGENERAL CAPITAL FUND




Assets

Cash and Cash Equivalents 3,513,428$ 2,262,319$ Restricted Cash 202,745 202,745

Total Cash and Cash Equivalents 3,716,173 2,465,064

Grants Receivable 1,900,259 2,150,259 Developer's Contribution Receivable 333,000 333,000 Due from Current Fund 2,385,656 91,883 Deferred Charges to Future Taxation:

Funded 172,954,741 183,595,105 Unfunded 64,202,694 58,173,746

Total Assets 245,492,523$ 246,809,057$


General Serial Bonds Payable 123,562,736$ 127,392,916$ School Serial Bonds Payable 49,035,158 55,830,755 Capital Appreciation Bonds Payable 254,610 254,610 Green Trust Loan Payable 102,237 116,824 Bond Anticipation Notes Payable 39,072,000 35,949,000 Improvement Authorizations:

Funded 508,152 388,632 Unfunded 28,061,219 21,642,056

Contracts Payable 507,910 3,320,785 Capital Improvement Fund 450,120 19,172 Reserve for Capital Improvements-Veteran's Stadium 25,000 25,000 Reserve for Debt Service-BMUA 202,745 202,745 Reserve for Debt Service-BLRA 1,189,106 1,194,564 Reserve for Debt Service 497,046 257,171 Reserve for Dennis P. Collins Park 1,130,000 - Reserve for Debt Service 300,000 -

244,898,039 246,594,230 Fund Balance 594,484 214,827

Total Liabilities, Reserves and Fund Balance 245,492,523$ 246,809,057$

Bonds and Notes Authorized But Not Issued $ 25,130,694 $ 22,224,744


Exhibit C-1

CITY OF BAYONNEGENERAL CAPITAL FUND


STATEMENT OF FUND BALANCE

Balance: December 31, 2018 214,827$

Increased by:Premium on Sale of Notes 124,931$ Closeout of BLRA Escrow 249,505 Other 5,221

379,657

Balance: December 31, 2019 594,484$


Exhibit DSheet 1 of 2

CITY OF BAYONNEPARKING UTILITY FUND




Assets

Operating Fund:Cash and Cash Equivalents 514,052$ 601,613$ Due from Current Fund 98 - Due from Parking Utility Capital Fund 799 3,577

Total Utility Operating Fund Assets 514,949 605,190

Capital Fund:Cash and Cash Equivalents 942,716 973,543 Fixed Capital 5,354,861 5,354,861 Fixed Capital Authorized and Uncompleted 1,109,965 1,109,965

Total Utility Capital Fund Assets 7,407,542 7,438,369

Total Utility Fund Assets 7,922,491$ 8,043,559$


Exhibit DSheet 2 of 2

CITY OF BAYONNEPARKING UTILITY FUND





Operating Fund:Appropriation Reserves 114,216$ 79,758$ Reserve for Encumbrances 763 1,056 Reserve for Debt Service 9,790 9,511 Accrued Interest on Bonds 38,417 41,916 Due to Current Fund - 10,693

163,186 142,934 Fund Balance 351,763 462,256

Total Utility Operating Fund Liabilities, Reserves and Fund Balance 514,949 605,190

Capital Fund:Due to Parking Utility Operating Fund 799 3,577 Improvement Authorizations 31,392 109,441 Reserve for Amortization 3,314,861 3,104,861 Reserve for Deferred Amortization 1,109,965 1,109,965 Due to Bayonne Board of Education 450,000 450,000 Parking Revenue Serial Bonds Payable 2,040,000 2,250,000 Bond Reserve Fund 335,518 335,518 Capital Improvement Fund 125,000 75,000

7,407,535 7,438,362 Fund Balance 7 7

Total Utility Capital Fund Liabilities, Reserves and Fund Balance 7,407,542 7,438,369

Total Utility Fund Liabilities, Reserves and Fund Balance 7,922,491$ 8,043,559$


Exhibit D-1

CITY OF BAYONNEPARKING UTILITY OPERATING FUND


STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE


Revenue and Other Income Realized

Fund Balance Utilized 191,100$ 252,000$ Miscellaneous Revenue Anticipated 1,461,342 1,465,082 Other Credits to Income:

Unexpended Balance of Appropriation Reserves 70,265 98,103 1,722,707 1,815,185

Expenditures

Budget Appropriations:Operating 1,130,000 1,100,000 Capital Improvements 50,000 50,000 Debt Service 307,100 307,992 Statutory Expenditures 155,000 153,000

1,642,100 1,610,992

Statutory Excess to Fund Balance 80,607 204,193

Fund Balance, January 1 462,256 510,063 542,863 714,256

Decreased by:Utilized as Anticipated Revenue 191,100 252,000

Fund Balance, December 31 351,763$ 462,256$


Exhibit D-2

CITY OF BAYONNEPARKING UTILITY CAPITAL FUND


STATEMENT OF CHANGES IN FUND BALANCE


Balance: December 31, 2018 7$ 7$

Balance: December 31, 2019 7$ 7$


Exhibit D-3




Adopted ExcessBudget Realized (Deficit)

Operating Surplus Anticipated 191,100$ 191,100$ -$

Parking Fees 1,150,000 1,135,879 (14,121) Ticket Revenues 295,000 316,341 21,341 Interest on Investments and Deposits 9,500 9,122 (378) Total Budget Revenues 1,454,500 1,461,342 6,842

Total Parking Utility Revenues 1,645,600$ 1,652,442$ 6,842$


Exhibit D-4




ExpendedAdopted Budget After Paid orBudget Modification Charged Encumbered Reserved Cancelled

Operating:Salaries and Wages 780,000$ 780,000$ 765,643$ -$ 14,357$ -$ Other Expenses 160,000 160,000 107,890 763 51,347 - Group Insurance 130,000 130,000 90,431 - 39,569 - Other Insurance 60,000 60,000 60,000 - - -

1,130,000 1,130,000 1,023,964 763 105,273 -

Capital Improvements:Capital Improvement Fund 50,000 50,000 50,000 - - -

Debt Service:Bond Principal 210,000 210,000 210,000 - - - Interest on Bonds 100,600 100,600 97,100 - - 3,500

310,600 310,600 307,100 - - 3,500

Statutory Expenditures:Public Employees Retirement System 85,000 85,000 85,000 - - - Social Security (O.A.S.I.) 65,000 65,000 56,057 - 8,943 - Unemployment Compensation Insurance 5,000 5,000 5,000 - - -

155,000 155,000 146,057 - 8,943 -

Total Parking Utility Appropriations 1,645,600$ 1,645,600$ 1,527,121$ 763$ 114,216$ 3,500$

Appropriations


CITY OF BAYONNE

STATE OF NEW JERSEY

NEW JERSEY COMPREHENSIVE

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED ECEMBER 31, 2018

DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants

310 Broadway Bayonne, NJ 07002

(201) 437-9000 Fax: (201) 437-1432

E-Mail: [email protected]

Robert A. Gironda, CPA Linda P. Kish, CPA, RMA Robert G. Doria, CPA (N.J. & N.Y.) Mark W. Bednarz, CPA, RMA Frederick J. Tomkins, CPA, RMA Jason R. Gironda, CPA Matthew A. Donohue, CPA Mauricio Canto, CPA, RMA

INDEPENDENT AUDITOR’S REPORT

The Honorable Mayor and Members of the City Council Bayonne, New Jersey Report on the Financial Statements We have audited the accompanying financial statements – regulatory basis of the City of Bayonne, New Jersey (the “City”), which comprise the combined balance sheets – regulatory basis, of each fund and account group as of December 31, 2018 (with comparative totals as of December 31, 2017), the related statements of revenues, expenditures and changes in fund balance – regulatory basis, of the Current Fund, General Capital Fund and Parking Utility Operating and Capital Funds, for the year ended December 31, 2018 (with comparative totals for the year ended December 31, 2017), and the related statements of revenues, expenditures and changes in fund balance – regulatory basis – budget and actual, of the Current Fund and Parking Utility Operating Fund for the year ended December 31, 2018 (with comparative totals for the year ended December 31, 2017), and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the “Division”). Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, audit requirements prescribed by the Division and the standards applicable to the financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

1

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note A, the financial statements are prepared by the City on the basis of the financial reporting provisions of the Division, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to comply with the requirements of the Division. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note A and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to in the first paragraph do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City as of December 31, 2018 (with comparative totals as of December 31, 2017), or the changes in its financial position for the years then ended.

Basis for Qualified Opinion

As described in Note L, general fixed assets were not updated by the City in accordance with the requirements of the Division. General fixed asset balances remain on the books in the same amount as at December 31, 2016. The amount by which this departure would affect the City is not reasonably determinable, however it is presumed to be material. Qualified Opinion on Regulatory Basis Accounting

In our opinion, except for the effects of the matter described in the “Basis for Qualified Opinion” paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the comparative financial position – regulatory basis, of each fund of the City as of December 31, 2018 (with comparative totals as of December 31, 2017), and each fund’s respective revenues, expenditures and changes in fund balance – regulatory basis, and revenues, expenditures and changes in fund balance – regulatory basis - budget and actual, for the years then ended, on the basis of the financial reporting provisions of the Division as described in Note A.

2

Emphasis of Matter Regarding One-Time Revenues The City has relied on many one-time revenues and structural imbalance offsets to balance their budget. The City anticipates new ratables and payments in lieu of taxes will replace these sources in future years. Other Matters Management’s Discussion and Analysis Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 11 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in appropriate operational, economic, or historical context. This information is not required by the financial reporting provisions of the Division as described in Note A, however, it is allowable under the Division’s optional New Jersey Comprehensive Annual Financial Report (NJ-CAFR) reporting format. We have applied certain limited procedures to the management’s discussion and analysis in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s response to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

DONOHUE, GIRONDA, DORIA & TOMKINS, LLC

Certified Public Accountants

MAURICIO CANTO

Registered Municipal Accountant No. 555

Bayonne, New Jersey September 5, 2019

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CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2018

This discussion and analysis of the financial performance of the City of Bayonne provides an overall review of the City’s financial activities for the year ended December 31, 2018. The intent of this discussion and analysis is to look at the City’s financial performance as a whole. Readers should also review the basic financial statements and notes to enhance their understanding of the City’s financial performance. OVERVIEW OF THE FINANCIAL STATEMENTS The City uses accounting practices as prescribed by the State of New Jersey, Division of Local Government Services which defines the financial statements of a governmental unit to be presented on a modified accrual basis of accounting. The following financial statements offer financial information about the activities and operations of the City. FINANCIAL HIGHLIGHTS Key financial highlights for the year ended December 31, 2018 and 2017 are as follows:

Fund balance in the Current Fund was $28,593,921 and $15,411,379, respectively, as of December 31, 2018 and 2017. The City’s Current Fund operations resulted in a net increase to fund balance of $13,182,542 for the year ended December 31, 2018 and a net decrease to fund balance of $11,782,964 for the year ended December 31, 2017. Part of the reason for such a increase in fund balance is sales of municipal owned lands was $19,131,501 more than anticipated.

Total realized revenues and credits to income to the City’s Current Fund amounted to $262,728,586 for the year ended December 31, 2018 and $236,602,387 for the year ended December 31, 2017. Net of County, School and Special Improvement District taxes collected and non-revenue credits to income, realized revenues to the Current Fund amounted to $165,327,969 for the year ended December 31, 2018 and $141,705,524 for the year ended December 31, 2017.

Budgeted Current Fund appropriations, net of cancellations, for the year ended December 31, 2018 and 2017 were $140,314,153 and $137,423,298, respectively. During the current year, appropriations that were not paid or charged and which remained from the adopted budget of the year ended December 31, 2017 lapsed to operations in the amount of $1,362,216. Unexpended budget appropriations from the budget of the year ended December 31, 2018 will not lapse to operations until the year ended December 31, 2019, but are set aside in the current year as appropriation reserves in the amount of $5,215,340.

4



FINANCIAL HIGHLIGHTS (continued)

Included in the budgeted, or anticipated, revenues for the year ended December 31, 2017 and 2016 is the amount to be raised by taxation in support of the municipal budget in the amounts of $89,247,139 and $86,764,298, respectively. In addition to the support of the local municipal budget, the City collected and was obligated to remit the following taxes to the appropriate agencies, as per the Hudson County Board of Taxation Abstract of Ratables and Taxes Added or Omitted for the year ended December 31, 2018 and 2017: local school district taxes in the amount of $67,356,978 and $64,644,844, respectively, County of Hudson taxes in the amount of $27,023,585 and $27,038,146, respectively and Special Improvement District taxes in the amount of $290,000 each year.

On January 1, 2012, the City added the Parking Utility Fund to the books and records of the City. Prior to this date, the entity operated as a separate corporate body named the Bayonne Parking Authority. Parking Utility Operating Fund balance at December 31, 2018 and 2017 was $462,256 and $510,063, respectively, an decrease of $47,807 and $148,224, respectively.

During the year ended December 31, 2018, the City’s Parking Utility Operating Fund realized total revenues of $1,815,185, or $1,465,082 net of non-revenue credits to income.

Budgeted Parking Utility Operating Fund appropriations, net of cancellations, for the year ended December 31, 2018 and 2017 were $1,610,992 and $1,550,750, respectively. During the current year, appropriations that were not paid or charged and which remained from the adopted budget of the year ended December 31, 2017 lapsed to operations in the amount of $98,103. Unexpended budget appropriations from the budget of the year ended December 31, 2018 will not lapse to operations until the year ended December 31, 2019, but are set aside in the current year as appropriation reserves in the amount of $79,758.

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BASIC FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles and defines the financial statements of a governmental unit to be presented in accordance with accounting principles generally accepted in the United States of America (GAAP). The City presents the financial statements listed in the table of contents which are required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, herein referred to as the “Division”, and which differ from the financial statements required by GAAP. A description of funds and basis of accounting, including differences as compared to GAAP, can be found in Note A of the Notes to Financial Statements. FINANCIAL POSITION AS A WHOLE The following table is a summary of the assets, liabilities, reserves and fund balance for all funds of the City for the year ended December 31, 2018 and 2017:

2018 2017 2018 2017 2018 2017 2018 2017

Assets:

Cash and Cash Equivalents 44,008,590$ 31,606,889$ 16,242,372$ 14,044,041$ 2,465,064$ 2,572,489$ 1,575,156$ 1,486,887$ Taxes and Liens Receivable 1,615,721 1,567,972 - - - - - - Property Acquired for Taxes

at Assessed Valuation 6,473,400 6,482,400 - - - - - - Grants and Other

Intergovernmental Receivables 7,078,065 7,582,558 2,652,967 2,221,773 2,675,142 3,264,731 3,577 - Other Receivables 2,421,928 1,864,853 - - - - - 698,861 Unamortized Debt Issuance - - - - - - - - Deferred Charges 277,959 419,541 - - 241,768,851 238,123,558 - - Fixed Capital - - - - - - 5,354,861 5,354,861 Fixed Capital Authorized and Uncompleted - - - - - - 1,109,965 1,109,965

Total Assets 61,875,663$ 49,524,213$ 18,895,339$ 16,265,814$ 246,909,057$ 243,960,778$ 8,043,559$ 8,650,574$

Liabilities, Reserves and Fund Balance:

Bonds, Notes and Loans Payable -$ -$ -$ -$ 219,544,105$ 230,523,812$ 2,250,000$ 2,455,000$

Other Liabilities and Special Funds 23,271,539 24,955,845 18,895,339 16,265,814 5,025,157 2,930,065 1,116,470 1,461,247 Improvement Authorizations - - - - 22,119,251 10,393,306 - 214,431 Reserve for Certain Receivables 10,010,203 9,156,989 - - - - - - Reserve for Amortization - - - - - - 3,104,861 2,899,861 Reserve for Deferred Amortization - - - - - - 1,109,965 1,109,963 Fund Balance 28,593,921 15,411,379 - - 220,544 113,595 462,263 510,070

Total Liabilities, Reserves and Fund Balance 61,875,663$ 49,524,213$ 18,895,339$ 16,265,814$ 246,909,057$ 243,960,778$ 8,043,559$ 8,650,572$

Bonds and Notes Authorized But Not Issued $ 22,224,746 $ 7,599,746

(Combined Operating and Capital)Current Fund

(incl. State & Fed Grant Fund) Trust Fund General Capital FundParking Utility Fund

6



FINANCIAL POSITION AS A WHOLE (continued) In addition to the funds noted in the chart on the preceding page, the City maintains a separate accounting of fixed assets in accordance with accounting practices prescribed by the Division. As of December 31, 2018 and 2017 the City has fixed assets, recorded at historical cost, of $292,437,764 and $292,437,764, respectively. See Note L for more detail. CURRENT FUND FINANCIAL ANALYSIS

Significant changes from the prior year, as identified above, are as follows:

General government and public safety increased due to management decisions of the City.

Statutory expenditures increased due to state mandated pension payments.

2018 2017 Dollar

General Government 32,218,355$ 31,040,248$ 1,178,107$ 3.8 %Sanitation, Health and Welfare 6,987,000 6,882,000 105,000 1.5Public Safety 47,272,070 46,395,400 876,670 1.9Public Works, Parks and Recreation 9,889,000 9,850,000 39,000 0.4Contingent, Deferred Charges & Statutory 16,053,800 15,055,920 997,880 6.6Shared Service Agreements 142,000 142,000 - 0.0Public and Private Programs 2,868,336 2,480,797 387,539 15.6Other Special Items 25,749 75,948 (50,199) (66.1)Capital Improvements 100,000 20,000 80,000 400.0Emergency Appropriations - 217,150 (217,150) 100.0Debt Service 22,933,307 23,563,835 (630,528) (2.7)Reserve for Uncollected Taxes 1,740,000 1,700,000 40,000 2.4

Total Budgeted Appropriations 140,229,617 137,423,298 2,806,319 2.0Non-Budget Expenditures 2,145,865 1,114,063 1,031,802 92.6

Total Expenditures and Charges 142,375,482$ 138,537,361$ 3,838,121$ 2.8

Percentage

Year Ended December 31,

Current Fund Expenditures and Charges by Function

Change Increase (Decrease)

7



CURRENT FUND FINANCIAL ANALYSIS (continued)

Significant changes from the prior year, as identified above, are as follows:

Fund Balance utilized decreased due to management decisions of the City.

Other special items increased due to the City receiving $25,181,501 in sales of municipal owned land in 2018.

2018 2017 Dollar

Budgeted Operating Revenues:

Fund Balance Utilized 12,500,000$ 17,875,000$ (5,375,000)$ (30.1) %Local Revenues 11,705,565 10,193,731 1,511,834 14.8State Aid 8,829,801 8,829,801 - 0.0Shared Service Agreements 52,000 142,000 (90,000) (63.4)Public and Private Programs 2,894,085 2,361,129 532,956 22.6Other Special Items 37,085,448 10,927,897 26,157,551 239.4Delinquent Taxes 262,811 121,478 141,333 116.3Local Tax for Municipal Purposes 90,927,539 88,592,586 2,334,953 2.6

Subtotal 164,257,249 139,043,622 25,213,627 18.1Non-Budget Revenues 1,070,721 2,661,902 (1,591,181) (59.8)

Total Realized Revenues 165,327,970 141,705,524 23,622,446 Other Credits to Income 1,367,838 977,333 390,505 40.0Lapsed Appropriation Reserves 1,362,216 1,946,540 (584,324) (30.0)

Total Realized Revenues and

Other Credits to Income 168,058,024$ 144,629,397$ 23,428,627$ 16.2

Current Fund Realized Revenues and Other Credits to Income by Source

Year Ended December 31,

Percentage

Change Increase (Decrease)

8



CURRENT FUND FINANCIAL ANALYSIS (continued) A summary of the result of operations in the Current Fund, per the revenue and expenditure tables preceding, is as follows:

ANALYSIS OF BUDGET VS. ACTUAL The following table represents revenues anticipated and budgeted appropriations for the year ended December 31, 2018, as well as the actual results for all items budgeted. Non-budgeted revenues and expenditures are not included on the following table.

The item noted as “(1)” in the above budget table represent amounts “reserved”, or budgeted appropriations that will be available for expenditure in 2019.

Total Revenues 168,058,024$ Less: Fund Balance Utilized as Budget Revenues 12,500,000

Total Revenues, Net of Fund Balance Utilized 155,558,024 Less: Total Expenditures and Charges 142,375,482

Results of Current Year Operations 13,182,542

Fund Balance at December 31, 2017 15,411,379

Fund Balance at December 31, 2018 28,593,921$

Results of Current Fund Operations

Budgeted Actual Variance

Budgeted Approriations:Operations within "CAPS" 110,422,656$ 105,391,313$ 5,031,343$ Operations excluded from "CAPS"

Other Operations 1,954,139 1,788,142 165,997 Shared Service Agreements 142,000 142,000 - Public and Private Programs 2,894,084 2,876,084 18,000 Capital Improvements 100,000 100,000 - Debt Service 23,017,843 22,933,307 84,536 Deferred Charges 43,430 43,430 - Reserve for Uncollected Taxes 1,740,000 1,740,000 -

140,314,152$ 135,014,276$ 5,299,876$ Appropriations Cancelled 84,536 - 84,536

140,229,616$ 135,014,276$ 5,215,340$ (1)

Comparison of Budget vs. Actual

9



ANALYSIS OF BUDGET VS. ACTUAL (continued)

Anticipated revenue collections exceeded amounts anticipated by $23,943,096. Collections of current taxes exceeded budgeted amounts by $1,680,400. MUNICIPAL DEBT ADMINISTRATION The following table summarizes the changes in capital debt for the year ending December 31, 2018:

The City’s outstanding debt consists of Bond Anticipation Notes of $35,399,000, General Capital Bonds of $127,392,916, School Bonds of $55,830,755, Capital Appreciation Bonds of $254,610, Parking Revenue Bonds of $2,250,000, and Green Trust Loans of $116,824. All such debt is described in further detail in Note D of the notes to financial statements. The City did not have any Tax Anticipation Notes outstanding at December 31, 2018. This classification of debt does not affect the City’s available Debt Margin.

Budgeted Actual Variance

Anticipated Revenues:Fund Balance Utilized 12,500,000$ 12,500,000$ -$ Miscellaneous Revenue Anticipated 38,540,687 60,566,898 22,026,211 Receipts from Delinquent Taxes 26,326 262,811 236,485 Local Tax for Municipal Purposes 89,247,139 90,927,539 1,680,400

Total Anticipated Revenues 140,314,152$ 164,257,248$ 23,943,096$

Comparison of Budget vs. Actual

2018 2017

Debt Issued and Outstanding 221,244,105$ 232,978,812$

Authorized but not Issued 22,224,746 7,599,746

Total Debt Issued and

Authorized but not Issued 243,468,851$ 240,578,558$

10



MUNICIPAL DEBT ADMINISTRATION (continued) In addition, the City still has on its books debt authorized but not issued of $22,224,746. The purpose of these authorizations are for various purposes, including, school improvements and refunding bonds, demolition of unsafe buildings, various capital improvements and the dissolution of the BLRA. COMPONENT UNITS Had this report been prepared in conformity with GAAP, the financial statements of the Bayonne Housing Authority would have been discretely presented with the financial statements of the City, the primary government or oversight entity. These financial statements are prepared in accordance with accounting practices as prescribed by the Division and, accordingly, do not include the financial statements of its component units. CONTACTING THE CITY’S CHIEF FINANCIAL OFFICER This financial report is designed to provide the citizens and taxpayers of the City of Bayonne with a general overview of the City’s finances and to demonstrate the City’s accountability for the appropriations it budgets and grants, state aid and taxes levied that it receives. If you have any questions about this report or need additional information, you may contact the Chief Financial Officer at 630 Avenue C, Bayonne, New Jersey, 07002 or at (201) 858-6047.

11

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17

CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS


NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The City of Bayonne (the “City”) is a general-purpose government that is governed by a separately elected governing body. It is legally separate and fiscally independent of other state and local governments. The City is organized as a Mayor – Council municipality under the provisions of N.J.S.A. 40:69A. The City is governed by an elected Mayor and Council, and by such other officers and employees as may be duly appointed. The Council consists of five members, two of which are elected at-large by voters of the City and serve a term of four years beginning on the first day of July next following their election. The Mayor is also elected directly by the voters of the City and also serves a term of four years beginning the first day of July following the election. The financial statements of the City include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the City, as required by N.J.S.A. 40A:5-5. The Governmental Accounting Standards Board (herein referred to as “GASB”) establishes criteria to be used to determine which component units should be included in the financial statements of the primary government (the City). The State of New Jersey, Department of Community Affairs, Division of Local Government Services (the “Division”) requires the financial statements of the City to be reported separately from its component units. If the provisions of GASB had been complied with, the financial statements of the following component units would have been discretely presented with the financial statements of the City: Bayonne Housing Authority Special Improvement District Audit reports of the component units are available at the offices of each of the respective component units. BASIS OF PRESENTATION The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB codification establishes three fund categories to be used by general purpose governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (GAAP).

18



NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF PRESENTATION (continued) The financial statements of the City have been prepared in conformity with accounting principles and practices prescribed by the Division, which differ from GAAP. The principles and practices prescribed by the Division are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the City accounts for its financial transactions through the following separate funds and account group, which differ from the fund structure required by GAAP. DESCRIPTION OF FUNDS Current Fund – is used to account for all resources and expenditures for governmental operations of a general nature. The Federal and State Grant Fund is presented with the Current Fund. Trust Fund – are used to account for receipts, custodianship and disbursement of dedicated revenues in accordance with the purpose for which each reserve was created, subject to available cash in each individual trust fund reserve established pursuant to state statutes or as an agent for individuals and other governmental agencies. General Capital Fund – is used to account for the receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund or other funds. Also included in this fund are bonds and notes payable offset by deferred charges to future taxation. Parking Utility Fund – is used to account for operations and acquisition of capital facilities of the City owned Parking Utility. The Utility Operating Fund records revenues and expenditures applicable to the general operation of the program to provide parking management services in the City. The Utility Capital Fund is used to account for capital acquisitions and improvements used to support the City’s parking management functions, and the related debt issued to finance such acquisitions and improvements. General Fixed Assets – is not a separate fund type, but is an account group used to account for all fixed assets of the City.

19



NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) DESCRIPTION OF FUNDS (continued) The accounts of the City are maintained in accordance with the Division’s principles of fund accounting to ensure observance of limitations and restrictions on the resources available. The Division’s principles of fund accounting require that resources be classified for accounting and reporting purposes into funds in accordance with activities or objectives specified for the resources. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The General Fixed Assets account group, on the other hand, is a financial reporting device designed to provide accountability for certain fixed assets and the investment in those fixed assets that are not recorded in the funds because they do not directly affect net expendable available financial resources. BASIS OF ACCOUNTING

The City prepares its financial statements on a basis of accounting prescribed by the Division that demonstrates compliance with a modified accrual basis and the budget laws of the State of New Jersey, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The current financial resource focus and modified accrual basis of accounting is generally followed with significant exceptions which are explained as follows: Revenues – Revenues are realized when received in cash except for certain amounts which are due from other governmental units. Receipts from Federal revenue sharing funds and other Federal and State grants are realized as revenue when anticipated in the budget. Receivables for property taxes and other amounts that are due to the City are recorded with offsetting reserves on the balance sheet of the Current Fund. Such amounts are not recorded as revenue until collected. Accordingly, no provision has been made to estimate that portion of receivables that are uncollectible. Taxes and payments in lieu of taxes collected in advance are recorded as cash liabilities in the financial statements. GAAP requires revenues to be recognized in the accounting period when they become measurable and available and in certain instances reduced by an allowance for doubtful accounts. Reserve for Uncollected Taxes – Reserve for Uncollected Taxes is the minimum amount of which is determined on the percentage of collections experienced in the immediate preceding year. It is required to provide assurance that cash collected for taxes in the current year will provide sufficient cash flow to meet expected obligations. A Reserve for Uncollected Taxes is not established under GAAP.

20



NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) Expenditures – Expenditures are recorded on the “budgetary” basis of accounting. Generally, expenditures are recorded when an amount is encumbered for goods or services through the issuance of a purchase order in conjunction with the encumbrance accounting system. Appropriation reserves covering unexpended appropriation balances are automatically created at the end of each year and recorded as liabilities, except for amounts which may be canceled by the governing body. Appropriations for principal and interest payments on general capital indebtedness are provided on the cash basis. GAAP requires expenditures in the current (or general) fund, to be recognized in the accounting period in which the fund liability is incurred, if measurable, except for un-matured interest on general long-term debt, which should be recognized when due. Encumbrances – Encumbrances are contractual orders outstanding at year end reported as expenditures through the establishment of an encumbrance payable. Outstanding encumbrances at year end are reported as a cash liability in the financial statements. Encumbrances do not constitute expenditures under GAAP. Appropriation Reserves – Appropriations are available until lapsed at the close of the succeeding year to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Transfers are allowed between certain line items during the first three months of the fiscal year. Lapsed appropriation reserves are recorded as other credits to income. Appropriation Reserves do not exist under GAAP. Interfunds – Advances from the current fund are reported as interfunds receivable with offsetting reserves which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfunds receivable in the other funds are not offset by reserves. GAAP does not require the establishment of an offsetting reserve. Inventories of Supplies – The costs of inventories of supplies for all funds are recorded as expenditures at the time the individual items are purchased. The costs of inventories are not included on the various balance sheets. GAAP requires the cost of inventories to be reported as a current asset and equally offset by a fund balance reserve. Property Acquired for Taxes – Property Acquired for Taxes is recorded in the current fund at the assessed valuation when such property was acquired and is subsequently updated for revaluations. The values of the properties are fully reserved. GAAP requires such property to be recorded as a fixed asset at market value on the date of acquisition.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) Deferred Charges to Future Taxation – Funded and Unfunded – Upon the authorization of general capital projects, the City establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary or non-funding of the authorized costs of capital projects. The City may levy taxes on all taxable property within the City to repay the debt. Annually, the City raises the debt requirements for that particular year in the current budget. As the funds are raised by taxation, the deferred charges are reduced. GAAP does not require the establishment of deferred charges to future taxation. Fixed Capital and Fixed Capital Authorized and Uncompleted – The full amount of an authorized Utility Capital project or acquisition is recorded as Fixed Capital Authorized and Uncompleted, until that time when the authorized funds are used to purchase the acquisition or the capital project is completed, when it then is reclassified as Fixed Capital. Reserve for Amortization and Deferred Amortization – The funded amount of authorized Utility Capital authorizations are recorded upon ordinance adoption as a Reserve for Deferred Amortization. Principal payments on bonds or pay-downs on notes issued to finance these authorizations are amortized to the reserve for amortization if the project is completed or the deferred amortization if the project is not completed. Upon the completion of capital projects or acquisition of capital assets authorized, the reserve for deferred amortization is reclassified as reserve for amortization. Compensated Absences and Post-Employment Benefits – Compensated absences for vacation, sick leave and other compensated absences are recorded and provided for in the annual budget in the year in which they are paid, on a pay-as-you-go basis. Likewise, no accrual is made for post-employment benefits, if any, which are also funded on a pay-as-you-go basis. GAAP requires that the amount that would normally be liquidated with expendable financial resources to be recorded as an expenditure in the operating funds and the remaining obligations be recorded as long-term obligations. Improvement Authorizations – Improvement Authorizations in the general capital fund represent the unexpended balance of an ordinance appropriation and is similar to the unexpended portion of the budget in the current fund. GAAP does not recognize these amounts as liabilities.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) General Fixed Assets – Accounting for Governmental Fixed Assets as promulgated by the Division differs in certain respects from GAAP, and requires the inclusion of a statement of general fixed assets as part of the City’s basic financial statements. Fixed assets used in governmental operations (general fixed assets) are accounted for in an account group identified as “General Fixed Assets” and are not included within the records of any fund types. Purchases from these funds for fixed assets are recorded as expenditures within the fund. Public domain (infrastructure) general fixed assets consisting of certain improvements, other than improvements to buildings, such as improvements to roads, bridges, curbs and gutters, streets and sidewalks and drainage systems, are not capitalized. All fixed assets, except land, are valued at historical cost or estimated historical cost if actual historical cost is not available. Expenditures for construction in progress are recorded in the Capital Fund against authorizations under which the project was approved until such time as the construction is completed and put into operation. The City is required to maintain a subsidiary ledger of detailed records of fixed assets and to provide property management standards to control fixed assets. General fixed assets are defined as non-expendable personal property having a physical existence, a useful life of more than five years and an acquisition cost of $5,000 or more per unit. Fixed assets acquired through grants in aid or contributed capital have not been accounted for separately. No depreciation has been provided in the financial statements. GAAP requires the recording of infrastructure assets and requires capital assets be depreciated over their estimated useful life unless they are either inexhaustible or are infrastructure assets reported using the modified approach. Use of Estimates – The preparation of financial statements requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) Cash and Investments – New Jersey governmental units are required to deposit public funds in a public depository. Public depositories are defined by statutes as any State or federally chartered bank, savings bank or an association located in New Jersey or a state or federally chartered bank, savings bank or an association located in another state with a branch office in this State, the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”) and which receives or holds public funds on deposit, but does not include deposits held by the State of New Jersey Cash Management Fund. N.J.S.A. 40A:5-15.1 provides a list of securities which may be purchased by New Jersey municipal units. The City is also required to annually adopt a cash management plan and to deposit or invest its funds pursuant to the cash management plan. The cash management plan adopted by the City requires it to deposit funds as permitted in N.J.S.A 40:5-15.1, so long as the funds are deposited in public depositories protected from loss under the provisions of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey and requires all public depositories pledge collateral, having a market value of five percent of the average daily balance of collected public funds, to secure the deposits of governmental units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories in the collateral pool, is available to pay the full amount of their deposits to the governmental units. In 2009, legislation revised GUDPA to provide higher levels of security and oversight appropriate to contemporary banking conditions. Among the increased protections and oversight, the revised GUDPA ensures a common level of deposit risk by each bank choosing to accept local government deposits, requires banks to fully collateralize deposits over $200 million, implements enforcement protocol which allows the Department of Banking and Insurance to institute risk-based collateral requirements promptly when a bank shows signs of stress, provides enhanced oversight by the Department of banking and insurance and permits GUDPA certificates to be provided through an online system. Cash Equivalents include certificate of deposits with a maturity date of less than three (3) months.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) Budgets and Budgetary Accounting - An annual budget is required to be adopted and integrated into the accounting system to provide budgetary control over revenues and expenditures. Budget amounts presented in the accompanying financial statements represent amounts adopted by the City and approved by the Division in accordance with the Local Budget Law. Budgets are adopted on the same basis of accounting utilized for the preparation of the City’s financial statements. The budgetary requirements herein outlined are applicable to only the Current Fund, and not the Trust Fund, General Capital Fund or the General Fixed Assets account group. However, statutes require the City to adopt annually a six-year capital plan. This plan allows the governing body to expend or incur obligations for capital purposes only. Such projects under the plan must be adopted through capital ordinance. The City must adhere to procedures for adoption of its annual budget as established by the Division. These procedures include statutory deadlines of: February 20 for introduction and approval and March 20 for adoption. These dates are subject to extension by the Division by approval of the Local Finance Board. Appropriations within the adopted budget cannot be modified until the final two months of the year at which time transfers between certain line items are allowed. Under certain circumstances emergency authorizations and insertions of items of revenue and appropriation are allowed by authorization of the governing body, subject to approval of the Division. The City must prepare its budgets in compliance with applicable laws capping the amounts by which both the budgeted appropriations and tax levy can be increased. A description of both “CAPS” follows: 1977 Appropriation "CAP": The 1977 Appropriation Cap is calculated using the formulas and provisions of N.J.S.A. 40A:4-45.1 through 4-45.43a. The law was originally adopted in 1976 and was most recently amended in 2003. Under this law, the City is permitted to increase its overall appropriations (with certain exceptions) by 2.5% or the “cost of living adjustment” (COLA), whichever is less. The COLA is calculated based on the traditional federal government inflation calculation. The City can, when the COLA is less than or equal to 2.5%, increase its allowable inside-the-cap spending to 3.5%, upon passage of a COLA Rate Ordinance. 2010 Levy "CAP": The 2010 Levy Cap is calculated using the formulas and provisions of N.J.S.A 40A:4-45.44 through 45.47. It establishes limits on the increase in the total City amount to be raised by taxation (tax levy). The core of the levy cap formula is a 2% increase to the previous year’s amount to be raised by taxation, net of any applicable cap base adjustments and emergency or special emergency appropriations.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIS OF ACCOUNTING (continued) Long-Term Obligations – General long-term debt is recognized as a liability of the General Capital Fund for the full amount. Reserves (Other than Reserve for Receivables) – Reserves, other than reserves for receivables, are considered liabilities, and not as a reservation of fund balance. Reserves for Receivables – Receivables of the City, with the exception of certain intergovernmental receivables, are offset on the balance sheet with a credit that is created to preserve the revenue recognition basis required by the Division’s accounting policies. The reserve delays the recognition of these revenues until they are received in cash. Advertising Costs – Advertising costs are charged against the appropriate budget line as they occur. The City does not engage in direct-response advertising. Sale of Municipal Assets – The proceeds of the sale of municipal assets can be held until made available through a future budget appropriation. GAAP requires such proceeds to be recorded as revenue in the year of sale. Fund Balance – Fund equity represented on the financial statements consists solely of Fund Balance, which is not further categorized with respect to reservations (portions of fund equity not available for appropriation for expenditure or legally segregated for a specific future use) or designations (plans for future use of financial resources). BASIC FINANCIAL STATEMENTS The GASB Codification also requires the financial statements of a governmental unit to be presented in the general purpose financial statements to be in accordance with GAAP. The City presents the financial statements listed in the table of contents which are required by the Division and which differ from the financial statements required by GAAP. Total Columns on Combined Statements – Total columns are captioned “memorandum only” to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with accounting principles generally accepted in the United States of America. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.

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NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) BASIC FINANCIAL STATEMENTS (Continued) Comparative Data – Comparative data for the prior year has been presented in the accompanying financial statements in order to provide an understanding of changes in the City’s financial position and operations. Comparative data is not presented in all statements because their inclusion would make certain statements unduly complex and difficult to understand. Reclassifications – Certain reclassifications have been made to the prior year financial statement presentation to correspond to the current year’s format. These reclassifications had no effect on fund balance or changes in fund balance. Reconciliation of Accounting Basis – As described throughout Note A, substantial differences exist between GAAP and the budgetary basis prescribed by the Division. Reconciliation between the two would not be meaningful or informative and therefore is not provided herein. COMPREHENSIVE ANNUAL FINANCIAL REPORT The City has elected to utilize the Comprehensive Annual Financial Report (“CAFR”) format for presentation of its audited financial statements. Where necessary, this format was modified to comply with reporting requirements prescribed by the Division. Some of the differences not already noted in the previous sections are described as follows: All funds are reported as major. No distinction between major and non-major funds is required by the Division, therefore related information such as combining statements are not required. GAAP requires this distinction. No government-wide statements as required under GAAP are presented, instead, combined statements of fund types and account groups are presented which better represents the basis of account prescribed by the Division. Certain information, including pension and other post-employment benefits, typically required by GAAP to be included in a “Required Supplementary Information” section is instead included in the Notes to Financial Statements. The City’s CAFR includes a section titled supplementary information. This section incorporates budgetary comparison schedules similar to those required by GAAP, but also includes other detailed schedules which comply with accounting practices prescribed by the Division.

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NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS DEPOSITS Cash and cash equivalents on deposit as of the years ended December 31, 2018 and 2017 are partially insured by the FDIC up to $250,000 for each depository. Deposits in excess of FDIC limits, as noted below, are entirely insured or collateralized by a collateral pool maintained by public depositories as required by the GUDPA (see Note A - Cash and Investments). Custodial Credit Risk - Custodial credit risk is the risk that, in the event of a bank failure, the City will not be able to recover deposits or collateral securities that are in the possession of an outside party. The City does not have a deposit policy for custodial credit risk. Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are:

a. Uncollateralized. b. Collateralized with securities held by the pledging financial institution. c. Collateralized with securities held by the pledging financial institution’s trust department or agent

but not in the City’s name. As of December 31, 2018, 63% of the City’s deposits were with one financial institution and 23% with another, for a total of 86% of the City’s deposits with two financial institutions. The City’s deposits of cash and cash equivalents at December 31, 2018 are summarized in the following table.

Foreign Currency Risk - Foreign currency risk is the risk that changes in exchange rates will adversely affect deposits. None of the City’s deposits as of December 31, 2018 are known to be held in foreign currency. INVESTMENTS Custodial Credit Risk - In the case of investments, custodial credit risk is the risk that, in the event of failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities in the possession of an outside party. Investments are exposed to custodial credit risk if they are uninsured, are not registered in the City’s name and are held by either the counterparty or its trust department or agent, but not in the City’s name.

Insured - FDIC 1,250,000$ Insured - GUDPA 64,520,736

65,770,736$

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NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) INVESTMENTS (continued) New Jersey statutes permit the City to purchase the following types of securities when authorized by the cash management plan (described in note A): Bonds or other obligations of the United States of America or obligations guaranteed by the United

States of America. Government money market mutual funds. Any obligation that a federal agency or a federal instrumentality has issued in accordance with an

act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor.

Bonds or other obligations of the local unit or bonds or other obligations of school districts of which the local unit is a part or within which the school district is located.

Bonds or other obligations having a maturity date not more than 397 days from the date of purchase, approved by the Division of Investment of the Department of the Treasury for investment by local units.

Local government investment pools. Deposits with the State of New Jersey Cash Management Fund. Agreements for the repurchase of fully collateralized securities if (a) the underlying securities are

permitted investments pursuant to the first and third bullets of this section, (b) the custody of collateral is transferred to a third party, (c) the maturity of the agreement is not more than 30 days, (d) the underlying securities are purchased through a public depository and (e) a master repurchase agreement providing for the custody and security of collateral is executed.

Foreign Currency Risk – Investments are also exposed to the same foreign currency risk as deposits. It is the risk that changes in exchange rates will adversely affect investments. The City does not have any investments known to be denominated in foreign currency as of December 31, 2018 and 2017. Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

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NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) INVESTMENTS (continued) Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City does not have an investment policy regarding the management of credit risk. Concentration of Credit Risk – The City places no formal limit on the amount it may invest in any one issuer. New Jersey Statutes limit municipal investments to those specified, and as summarily identified in the first paragraph of the “Investments” section of this Note. Government Investment Pools consist of investments in the New Jersey Cash Management Fund, MBIA Municipal Investors Service Corporation and NJ Asset Rebate and Management Program (NJARM). Because of their liquidity, these investments are classified as cash and cash equivalents on the financial statements of the City. For the year ending December 31, 2018, the City did not have any investments that are classified as Government Investment Pools. Money Market Accounts – As of December 31, 2018 and 2017, the City’s Parking Utility Fund invested $596,196 and $627,036, respectively, in FDIC-insured money market “buckets”. Due to their liquidity, these funds are considered cash and cash equivalents on the City’s financial statements.

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NOTE C. PROPERTY TAXES PROPERTY TAX CALENDAR Property tax revenues are collected in quarterly installments due February 1, May 1, August 1 and November 1. Property taxes unpaid on April 1 of the year following their final due date are subject to tax sale in accordance with State statutes. The amount of tax levied includes not only the amount required in support of the City’s annual budget, but also the amounts required in support of the budget of the entities that follow: School Taxes – The City is responsible for levying, collecting and remitting school taxes for the local school district. Monies are forwarded to the school district monthly. Operations is charged for the full amount due to operate the local school district, and is based upon the annual County certification of apportionment of levies. As of December 31, 2018 and 2017, the City had no school taxes payable. The school tax levy collected by the City during the year ended December 31, 2018 and 2017, amounted to $67,356,978 and $64,644,844, respectively. County Taxes – The City is responsible for levying, collecting and remitting county taxes for the County of Hudson. Operations is charged for the amount due the County for the year, based upon the ratables required to be certified to the County Board of Taxation by January 10 of the current year. Monies are forwarded to the County on a quarterly basis. In addition, operations is charged for the County share of Added and Omitted Taxes certified to the County Board of Taxation by October 10 of the current year, and due to be paid to the County by February 15 of the following year. As of December 31, 2018 and 2017, the City had County taxes payable of $184,803 and $193,479, respectively. The total County tax levied to City taxpayers during the year ended December 31, 2018 and 2017 amounted to $27,024,524 and $27,038,146, respectively. Special Improvement District – The City is responsible for levying, collecting and remitting Special Improvement District (SID) taxes. The SID taxes are derived from assessments made upon the members within the SID and billed through the quarterly property tax bills as noted above. Monies are forwarded to the SID on a quarterly basis. As of December 31, 2018 and 2017, the City had Special Improvement District taxes payable of $630,091 and $515,404, respectively. The amount of Special Improvement District Tax levied and collected by the City amounted to $290,000, each year, during the year ended December 31, 2018 and 2017.

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NOTE C. PROPERTY TAXES (continued) PROPERTY TAXES RECEIVABLE Reserve for Uncollected Taxes – Reserve for Uncollected Taxes is a non-spending item of appropriation required by statute to be included in the City’s annual budget. This appropriation protects the City from taxes not paid currently by providing assurance that cash collected in the current year will provide sufficient cash flow to meet obligations as they become due. The minimum amount required to be appropriated in the budget is determined by the percentage of collections experienced in the immediate preceding year, unless the three-year average option is chosen. The budgeted reserve amount for uncollected taxes during the year ended December 31, 2018 and 2017, amounted to $1,740,000 and $1,700,000, respectively. Delinquent Taxes and Tax Title Liens – As described in Note A, taxes receivable and tax title liens are realized as revenue when collected. Uncollected receivables are fully reserved, so no provision is made for the uncollectible portions of these taxes. As of December 31, 2018 and 2017, property taxes receivable were $1,053,069 and $1,036,505, respectively and tax title liens receivable were $562,652 and $531,467, respectively. Property Acquired by Tax Title Lien Liquidation – In lieu of a traditional tax sale, the City once again conducted a bulk levy sale and sold the balance due of its tax levy for the fiscal year ended December 31, 2018 to a third party purchaser. The sale included all properties except those which were in bankruptcy or subject to an existing municipal lien. The City received the full value of the balance due plus a premium of $100,000. The City continues to collect the taxes and any interest due and forwards those amounts weekly to the purchaser. There were no additional properties acquired by tax title lien liquidation during the year ended December 31, 2018 and 2017. The value of properties acquired by tax title lien liquidation as of December 31, 2018 and 2017 were $6,473,400 and $6,482,000, respectively. Prepaid Taxes – Taxes collected in advance are recorded as cash liabilities in the financial statements. Prepaid taxes as of December 31, 2018 and 2017 were $794,576 and $3,549,214, respectively. Tax Overpayments – Overpaid taxes collected during the year and due to taxpayers either as a refund or tax credit are recorded as cash liabilities in the financial statements. Tax overpayments as of December 31, 2018 and 2017 were $3,595,966 and $3,467,851, respectively.

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NOTE D. MUNICIPAL DEBT SUMMARY OF MUNICIPAL DEBT The Local Bond Law governs the issuance of bonds to finance general municipal and utility capital expenditures. Most bonds are retired in serial installments within the statutory period of usefulness. Other bonds may be term bonds with sinking fund requirements. Bonds issued by the City are general obligation bonds, backed by the full faith and credit of the City. Bond Anticipation Notes, which are issued to temporarily finance capital projects, must be paid off within ten years or retired by the issuance of bonds. School Debt (Included as Obligations of the City) – As of January 2015, The City of Bayonne Board of Education is classified as a Type II School District. Any bonds or notes issued and authorized by the Board of Education before January 2015 are general obligations of the City. These obligations are accordingly reported on the balance sheet of the City’s General Capital Fund and are accordingly included in the summary of municipal debt.

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NOTE D. MUNICIPAL DEBT (continued) SUMMARY OF MUNICIPAL DEBT (continued) At December 31, 2018 and 2017, the City’s statutory debt is summarized as follows:

Dec. 31, 2018 Dec. 31, 2017Issued:General:

General Serial Bonds 127,392,916$ 109,748,150$ Green Acres Trust Loan 116,824 144,977 Capital Appreciation Bonds 254,610 244,568 Bond Anticipation Notes 35,399,000 57,800,000

Self-Liquidating Purposes:Parking Revenue Bonds 2,250,000 2,455,000

School:School Serial Bonds 55,830,755 62,586,117

Gross Statutory Debt Issued 221,244,105 232,978,812

Less Statutory Deductions to Debt Limit:

Bonds and Notes for School Purposes (55,830,755) (62,586,117)

NJSA 40:2-52 Refunding Bonds - Pension Refunding (14,310,000) (14,510,000)

Self-Liquidating Purposes (2,250,000) (2,455,000)

Funds Held to Pay Bonds and Notes (1,194,564) (1,190,331)

Net Debt Issued 147,658,786 152,237,364

Authorized but not Issued:General:

General Improvements 18,524,746 3,899,746 School Improvements 3,700,000 3,700,000 Gross Authorized but not Issued 22,224,746 7,599,746

Less Statutory Deductions:

Applicable for School Purposes (3,700,000) (3,700,000)

Net Debt Authorized but Not Issued 18,524,746 3,899,746

Net Bonds and Notes Issued and Authorized but not Issued 166,183,532$ 156,137,110$

SUMMARY OF MUNICIPAL DEBT

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NOTE D. MUNICIPAL DEBT (continued) SUMMARY OF MUNICIPAL DEBT (continued) The City’s long-term debt is summarized below:

Debt Refunding During the year ended December 31, 2018, the City renewed or refunded Bond Anticipation Notes, the proceeds of which were used to pay the principal of the maturing notes less statutory minimum payments appropriated through the Current Fund budget. Bond Anticipation Notes are more fully discussed herein. Qualified Bonds Certain bonds of the City are issued pursuant to the Municipal Qualified Bond Act. Under this act, portions of State Aid revenues are withheld by the State of New Jersey and forwarded directly to paying agents for principal and interest payments of such bonds. The City is responsible to certify maturity schedules of the qualified bonds to the State. During the year ended December 31, 2018 and 2017, the State of New Jersey paid $7,344,246 and $7,027,399, respectively of qualified bond interest and principal maturities directly to paying agents on behalf of the City in lieu of State Aid. BONDS PAYABLE General Serial Bonds Payable The City has outstanding at December 31, 2018 various general serial bond debt issues. The following table is a summary of the activity for such debt during the year ended December 31, 2018 and the short-term liability for each issue:

Balance Balance Due byDec. 31, 2017 Increase Accrual Retirements Dec. 31, 2018 Dec. 31, 2019

General Capital Fund:General Serial Bonds 109,748,150$ 20,655,000$ -$ 3,010,234$ 127,392,916$ 3,830,180$ School Serial Bonds 62,586,117 - - 6,755,362 55,830,755 6,795,597 Capital Appreciation Bonds 244,568 - 10,042 - 254,610 - Green Acres Trust Loan 144,977 - - 28,153 116,824 14,587

Parking Utility Capital Fund:Parking Revenue Bonds 2,455,000 - - 205,000 2,250,000 210,000

175,178,812$ 20,655,000$ 10,042$ 9,998,749$ 185,845,105$ 10,850,364$

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NOTE D. MUNICIPAL DEBT (continued) BONDS PAYABLE (Continued) General Serial Bonds Payable (Continued)

Balance Balance Due by Description Dec. 31, 2017 Increase Decrease Dec. 31, 2018 Dec. 31, 2019

Employee Retirement Incentive Refunding BondsIssued 1/15/2003 for $15,795,000Maturing annually from 2011 to 2033Bearing variable interest rates ranging

from 5.05% to 5.68% 14,510,000$ -$ 200,000$ 14,310,000$ 250,000$ Capital Appreciation Bonds

Issued 7/3/2003 for $6,123,000Maturing annually from 2011 to 2023Bearing variable interest rates ranging

from 3.55% to 5.17% 2,793,150 - 550,234 2,242,916 525,180 Hudson County Improvement Authority

Issued 10/24/2008 for $10,000,000Maturing annually from 2011 to 2025Bearing an interest rates of 7.5% 5,900,000 - 665,000 5,235,000 635,000

General Improvement Infrastructure BondIssued 6/24/2009 for $67,625,000Maturing annually from 2010 to 2039Bearing variable interest rates ranging

from 4.0% to 5.75% 1,460,000 - 695,000 765,000 765,000 Redevelopment Agency Revenue Bonds


from 5.4% to 7.625% 555,000 - 270,000 285,000 285,000 Special Assessment Bonds


from 2.25% to 5.00% 5,360,000 - 320,000 5,040,000 315,000 General Obligation Refunding Bonds

Issued 6/10/2015 for $3,020,000 plus refunding

of Redevelopment Agency Revenue Bonds

in amount of $11,755,000

Maturing annually from 2015 to 2038

Bearing variable interest rates ranging

from 2.0% to 4.125% 14,155,000 - 190,000 13,965,000 190,000

Summary of General Serial Bonds Activity

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NOTE D. MUNICIPAL DEBT (continued) BONDS PAYABLE (continued) General Serial Bonds Payable (continued)

In a prior year, the City elected to participate in the Early Retirement Incentive (ERI) Program for employees covered by PERS, PFRS and TPAF. On February 6, 2003, the City issued Federally Taxable Pension Refunding Bonds, Series 2003, in the amount of $15,795,000, the proceeds of which were used to pay the pension liabilities. These bonds are included in the above general serial bonds payable. School Serial Bonds Payable The City has outstanding at December 31, 2018 various school serial bond debt issues. The following table is a summary of the activity for such debt during the year ended December 31, 2018 and the short term liability for each issue:

Balance Balance Due by Description Dec. 31, 2017 Increase Decrease Dec. 31, 2018 Dec. 31, 2019

General Improvement Infrastructure Bond

Issued 3/22/2016 for $66,000,000



from 3.0% to 5.0% 65,015,000$ -$ 120,000$ 64,895,000$ 120,000$ General Improvement Infrastructure Bond


from 2.0% to 5.0% - 7,208,000 - 7,208,000 390,000 General Improvement Infrastructure Bond


from 4.25% to 5.00% - 13,447,000 - 13,447,000 355,000

109,748,150$ 20,655,000$ 3,010,234$ 127,392,916$ 3,830,180$

Summary of General Serial Bonds Activity - continued

37



NOTE D. MUNICIPAL DEBT (continued) BONDS PAYABLE (continued) School Serial Bonds Payable (continued)

Balance Balance Due by Description Dec. 31, 2017 Decrease Dec. 31, 2018 Dec. 31, 2019

School Refunding BondsIssued 4/1/2003 for $3,965,000Maturing annually from 2016 to 2023Bearing variable interest rates ranging

from 5.0% to 5.5% 3,120,000$ 455,000$ 2,665,000$ 480,000$ Capital Appreciation Bonds


from 4.075% to 4.974% 1,564,658 349,782 1,214,876 329,960 Capital Appreciation Bonds


from 3.75% to 4.96% 5,833,459 1,100,580 4,732,879 1,050,637 School Bonds (NJ School Bond Reserve Act)


from 6.0% to 6.25% 375,000 375,000 - - Early Retirement Incentive Refunding Bonds


from 3.0% to 6.25% 4,455,000 1,015,000 3,440,000 1,080,000 School Bonds


from 2.25% to 5.00% 5,461,000 235,000 5,226,000 240,000

Summary of School Serial Bonds Activity

38



NOTE D. MUNICIPAL DEBT (continued) BONDS PAYABLE (continued) School Serial Bonds Payable (continued)


School BondsIssued 11/19/2014 for $1,027,000Maturing annually from 2015 to 2021Bearing variable interest rates ranging

from 2.00% to 3.25% 607,000$ 145,000$ 462,000$ 150,000$ School Refunding Bonds


from 3.0% to 5.0% 23,390,000 2,650,000 20,740,000 2,640,000 School Bonds (NJ School Bond Reserve Act)

Issued 6/10/2015 for $1,639,000 plus

refunding of old School Bonds in amount

of $13,836,000



from 2.0% to 5.0% 14,995,000 105,000 14,890,000 505,000 School Refunding Bonds

Series 2016

Issued 4/19/2016 for $3,425,000



from 2.0% to 4.0% 2,785,000 325,000 2,460,000 320,000

62,586,117$ 6,755,362$ 55,830,755$ 6,795,597$

Summary of School Serial Bonds Activity

39



Parking Utility Capital Fund - Revenue Bonds Payable The City has outstanding at December 31, 2018 various Parking Utility Bonds. The following table is a summary of the activity for such debt during the year ended December 31, 2018 and the short term liability for each issue:

The Parking Utility Fund had an excess in revenues for the year ended December 31, 2018 and therefore qualifies as self-liquidating. That calculation is provided below. An excess in revenues allows the entire amount of Parking Revenue Bonds outstanding, $2,250,000, to be deducted from the gross debt of the City.


Parking Utility Refunding Bonds

Issued 6/10/2015 for $50,000 plus

refunding of parking revenue bonds

in amount of $2,480,000



from 2.0% to 5.0% 2,455,000$ 205,000$ 2,250,000$ 210,000$

2,455,000$ 205,000$ 2,250,000$ 210,000$

Summary of Parking Revenue Bond Activity

Total Cash Receipts from Fees, Rents or Other Charges 1,465,082$ Surplus Anticipated 252,000

1,717,082$ Operating and Maintenance Cost 1,223,242 Debt Service:

Interest 102,992 Principal 205,000

1,531,234

Excess in Revenues 185,848$

Self-Liquidating Utility Calculation

40



NOTE D. MUNICIPAL DEBT (continued) BONDS PAYABLE (continued) Capital Appreciation bonds – Dissolution of Bayonne Municipal Utilities Authority (BMUA) Effective December 31, 2016, the Bayonne Municipal Utilities Authority was officially dissolved and operations went to the City. The City is responsible for all debt of the BMUA, which consists of two capital appreciation bonds. Capital appreciation bonds are similar to zero coupon bonds in that they are offered at a huge discount and “accrete” to par value over the life of the bond, in this case 40 years, maturing in 2052. The following table is a summary of the activity for such debt during the year ended December 31, 2018:

Water System Revenue Bond: Issued 12/21/2012 for $100,000 maturing in 2052 Bearing an interest rate of 4.06%

Purchase Price Accrual Accrual Accrual

2012 100,000$ 2026 175,647$ 2040 308,517$ 2013 104,106$ 2027 182,858 2041 321,184 2014 108,380 2028 190,365 2042 334,370

2015 112,830 2029 198,181 2043 348,098

2016 117,462 2030 206,318 2044 362,390

2017 122,284 2031 214,788 2045 377,268 2018 127,305 2032 223,607 2046 392,758 2019 132,532 2033 232,787 2047 408,883 2020 137,973 2034 242,345 2048 425,670 2021 143,638 2035 252,294 2049 443,146 2022 149,535 2036 262,653 2050 461,340 2023 155,674 2037 273,436 2051 480,281 2024 162,066 2038 284,663 2052 500,000 2025 168,719 2039 296,350

Sewer System Revenue Bond: Issued 12/21/2012 for $100,000 maturing in 2052 Bearing an interest rate of 4.06%

Purchase Price Accrual Accrual Accrual

2012 100,000$ 2026 175,647$ 2040 308,517$ 2013 104,106$ 2027 182,858 2041 321,184 2014 108,380 2028 190,365 2042 334,370

2015 112,830 2029 198,181 2043 348,098

2016 117,462 2030 206,318 2044 362,390

2017 122,284 2031 214,788 2045 377,268 2018 127,305 2032 223,607 2046 392,758 2019 132,532 2033 232,787 2047 408,883 2020 137,973 2034 242,345 2048 425,670 2021 143,638 2035 252,294 2049 443,146 2022 149,535 2036 262,653 2050 461,340 2023 155,674 2037 273,436 2051 480,281 2024 162,066 2038 284,663 2052 500,000 2025 168,719 2039 296,350

Description

Summary of Capital Appreciation Bonds Activity

Description

41



NOTE D. MUNICIPAL DEBT (continued) LOANS PAYABLE Green Trust Loans Payable The City has outstanding at December 31, 2018 various Green Trust Loans. The following table is a summary of the activity for such debt during the year ended December 31, 2018 and the short term principal liability for each issue:


1983 Green TrustIssued 1998 for $450,000Maturing annually from 1999 to 2018Bearing variable interest rates 13,853$ 13,853$ -$ -$

1995 GFBIssued 2006 for $171,000Maturing annually from 2007 to 2026Bearing variable interest rates 82,739 9,023 73,716 9,204

95GTIssued 2006 for $100,000Maturing annually from 2007 to 2026Bearing variable interest rates 48,385 5,277 43,108 5,383

144,977$ 28,153$ 116,824$ 14,587$

Summary of Green Trust Loans Activity

42



NOTE D. MUNICIPAL DEBT (continued) DEBT SERVICE REQUIREMENTS TO MATURITY The repayment schedule of annual debt service principal and interest for the next five years, and five year increments there-after, for bonds issued and outstanding is as follows:

The repayment schedule of annual debt service principal and interest for the next five years, and five year increments there-after, for loans outstanding is as follows:

Year Ended Total Total

Dec. 31, Principal Interest Principal Interest Principal Interest Principal Interest

2019 3,830,180$ 6,870,268$ 6,795,597$ 3,724,446$ 210,000$ 100,600$ 10,835,777$ 10,695,314$

2020 4,159,837 6,454,496 7,004,121 3,555,954 220,000 92,200 11,383,958 10,102,650

2021 4,360,000 6,300,837 7,062,981 3,390,632 230,000 83,400 11,652,981 9,774,869

2022 4,489,944 6,131,629 5,890,629 3,184,587 235,000 74,200 10,615,573 9,390,416

2023 4,607,955 5,894,223 5,696,427 2,680,140 245,000 64,800 10,549,382 8,639,163

2024-2028 26,930,000 22,419,969 15,860,000 3,254,606 1,110,000 129,700 43,900,000 25,804,275

2029-2033 30,363,000 15,979,156 7,095,000 646,844 - - 37,458,000 16,626,000

2034-2038 35,935,000 8,361,921 426,000 14,910 - - 36,361,000 8,376,831

2039-2043 9,480,000 1,377,713 - - - - 9,480,000 1,377,713 2044-2048 3,237,000 376,267 - - - - 3,237,000 376,267

127,392,916$ 80,166,479$ 55,830,755$ 20,452,119$ 2,250,000$ 544,900$ 185,473,671$ 101,163,498$

Schedule of Debt Service Requirements to Maturity - Bonds Issued and Outstanding

General Serial Bonds School Serial Bonds Parking Revenue Bonds

Year Ended

Dec. 31, Principal Interest

2019 14,587$ 2,264$ 2020 14,881 1,971 2021 15,180 1,672 2022 15,485 1,366 2023 15,797 1,055

2024-2026 40,894 1,235

116,824$ 9,563$

Green Trust Loans

Schedule of Debt Service Requirements to Maturity - Loans Outstanding

43



NOTE D. MUNICIPAL DEBT (continued) NOTES PAYABLE Bond Anticipation Notes The City issues bond anticipation notes to temporarily fund various capital projects prior to the issuance of serial bonds. The term of the notes cannot exceed one year, but the notes may be renewed from time to time for a period not exceeding one year. Generally, such notes may be paid no later than the close of the tenth fiscal year next following the date of the original notes. The Division also prescribes that notes cannot be renewed past the third anniversary date of the original note unless an amount equal to at least the first legally required installment is paid prior to each anniversary date. The purposes for which these notes were issued as well as more detailed information of the above-referenced information can be found in the table that follows:

Paid by DebtInterest Maturity Notes Reserved from Paid Maturity Interest

Date Amount Rate Date Balance Issued 2018 Bond Proceeds Down Balance Date Rate

Refunding of Tax Appeals:4/24/2014 2,250,000$ 2.250% 6/15/2018 663,750$ -$ -$ 528,750$ 135,000$ 6/4/2019 3.000%12/22/2015 4,230,000 2.250% 6/15/2018 2,538,000 - - 846,000 1,692,000 6/4/2019 3.000%

Citywide Communication Systems:3/9/2007 5,075,000 2.250% 6/15/2018 2,669,614 - 2,670,000 (386) - - -

Various Capital Improvements:3/9/2007 1,690,000 2.250% 6/15/2018 758,636 - 758,000 636 - - - 7/6/2015 3,780,000 2.250% 6/15/2018 3,780,000 - 3,780,000 - - - -

10/19/2017 4,500,000 2.250% 10/18/2018 4,500,000 - - - 4,500,000 10/3/2019 3.000%10/19/2017 1,675,000 2.250% 10/18/2018 1,675,000 - - - 1,675,000 10/3/2019 3.000%

BLRA Dissolution:7/25/2013 43,735,000 2.000% 6/15/2018 41,215,000 - 13,447,000 371,000 27,397,000 6/4/2019 2.000%

Roadway Improvements-LeFante10/3/2018 550,000 - - - 550,000 - - 550,000 10/3/2019 3.000%

57,800,000$ -$ 20,655,000$ 1,746,000$ 35,399,000$

DETAIL OF BOND ANTICIPATION NOTES

December 31, 2017

Original Issue

December 31, 2018

44



NOTE D. MUNICIPAL DEBT (continued) NOTES PAYABLE (continued) Tax Anticipation Notes Tax anticipation notes are issued for interim financing of Current Fund operations. The local budget law allows the City to issue notes in anticipation of the collection of taxes or other revenues of such year for the purposes provided for in the current operating budget. These notes cannot exceed 30% of the tax levy of the previous fiscal year plus 30% of the miscellaneous revenues realized in cash of the previous fiscal year. All notes must be paid within 120 days of the beginning of the next fiscal year. There were no tax anticipation notes issued or outstanding at December 31, 2018 and 2017, respectively. BONDS AND NOTES AUTHORIZED BUT NOT ISSUED At December 31, 2018 and 2017, the City has authorized but not issued bonds and notes of $22,224,746 and $7,599,746, respectively, in the General Capital Fund. The following activity relates to bonds and notes authorized but not issued that occurred during the year ended December 31, 2018:

SUMMARY OF STATUTORY DEBT CONDITION – ANNUAL DEBT STATEMENT The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement.

Balance Debt Notes BalanceDec. 31, 2017 Authorized Issued Dec. 31, 2018

General Improvements 3,899,746$ 15,175,000$ 550,000$ 18,524,746$

School Improvements 3,700,000 - - 3,700,000

7,599,746$ 15,175,000$ 550,000$ 22,224,746$

Gross Debt Deductions Net Debt

School Purposes 59,530,755$ 59,530,755$ -$ Self-Liquidating Purposes 2,250,000 2,250,000 - General Bonds and Notes 181,688,096 15,504,564 166,183,532

243,468,851$ 77,285,319$ 166,183,532$

45



NOTE D. MUNICIPAL DEBT (continued) SUMMARY OF STATUTORY DEBT CONDITION – ANNUAL DEBT STATEMENT (continued) Net debt of $166,183,532 divided by the equalized valuation basis per N.J.S.A. 40A:2-2 as amended, $5,879,548,723 equals 2.826%. Equalized valuation basis is the average of the equalized valuations of real estate, including improvements, and the assessed valuation of class II Railroad Property of the County for the last 3 preceding years. BORROWING POWER UNDER N.J.S.A. 40A:2-6 AS AMENDED

NOTE E. FUND BALANCES APPROPRIATED Fund balance of the City consists of cash surplus and non-cash surplus. The City can anticipate fund balance to support its budget of the succeeding year, however, the use of non-cash surplus is subject to the prior written consent of the Division. Fund balances at December 31, 2018 and 2017 which were appropriated and included as anticipated revenue in the Current Fund and Parking Utility Operating Fund budgets of the succeeding year were as follows:

Borrowing Power

3 1/2% of Equalized Valuation Basis 205,784,205$ Less: Net Debt 166,183,532

Excess Borrowing Power 39,600,673$

Fund Balance Utilized in Fund Balance Utilized inDec. 31, 2017 2018 Budget Dec. 31, 2018 2019 Budget

Current Fund 15,411,499$ 12,500,000$ 28,593,921$ 14,408,000$

Capital Fund 113,595 - 214,827

Parking Utility Fund:

Operating 510,063 252,000 462,256 191,100

Capital 7 - 7

46



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION Substantially all City employees participate in the Consolidated Police and Fireman’s Pension Fund (CPFPF), Public Employees Retirement System (PERS), Police and Fireman’s Retirement System of New Jersey (PFRS) or the Defined Contribution Retirement Program (DCRP), all of which are multiple employer plans sponsored and administered by the State of New Jersey, with the exception of the CPFPF, which is a single employer plan. The CPFPF, PERS and PFRS are cost sharing contributory defined benefit public employee retirement systems. The DCRP is a defined contribution plan. In addition, certain employees participate in the City’s Deferred Compensation Plan. STATE-MANAGED PENSION PLANS - CPFPF The Consolidated Police and Fireman's Pension Fund (CPFPF) is a single employer contributory defined benefit plan which was established on January 1, 1952, under the provisions of N.J.S.A. 43:16 to provide retirement, death and disability benefits to county and municipal police and firemen who were appointed prior to July 1, 1944. The fund is a closed system with no active members. The City currently only makes contributions for its retirees who are enrolled in this pension fund. STATE-MANAGED PENSION PLANS - PERS The PERS was established in January, 1955 under provisions of N.J.S.A. 43:15A and provides retirement, death, disability and post-retirement medical benefits to certain qualifying Plan members and beneficiaries. Membership is mandatory to substantially all full time employees and vesting occurs after 8 to 10 years of service for pension benefits. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2007, 2008, 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is noted below:

Tier 1: Employees enrolled before July 1, 2007.

Tier 2: Employees eligible for enrollment after June 30, 2007 but before November 2, 2008.

Tier 3: Employees eligible for enrollment after November 1, 2008 but before May 22, 2010.

Tier 4: Employees eligible for enrollment after May 21, 2010 but before June 28, 2011.

Tier 5: Employees eligible for enrollment after June 27, 2011.

47



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Tier 1 and 2 employees must earn a base salary of $1,500 or more to enroll in the plan. Pensionable salaries are limited to the IRS maximum salary compensation limits for Tier 1 employees and social security maximum wage for Tier 2 employees. Tier 2 employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Tier 3 employees must earn a base salary that is annually adjusted. For the fiscal year ended December 31, 2018 and 2017 this base salary amount was $8,300 and $8,300, respectively. Employees earning between $5,000 and the Tier 3 minimum base salary are eligible for participation in DCRP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Tier 4 and 5 employees do not have a minimum salary requirement to enroll, but must work a minimum of 32 hours per week. Employees not meeting the minimum hour requirement but that make over $5,000 are eligible to enroll in DRCP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Service retirement benefits of 1/55th of final average salary for each year of service credit is available to tiers 1 and 2 members upon reaching age 60 and to tier 3 members upon reaching age 62. Service retirement benefits of 1/60th of final average salary for each year of service credit is available to tier 4 members upon reaching age 62 and tier 5 members upon reaching age 64. Early retirement benefits are available to tiers 1 and 2 members before reaching age 60, tiers 3 and 4 before age 62 and tier 5 with 30 or more years of service credit before age 65. Benefits are reduced by a fraction of a percent for each month that a member retires prior to the retirement age of their respective tier. Deferred retirement is available to members who have at least 10 years of service credit and have not reached the service retirement age for the respective tier. Each of the 5 Tiers have eligibility requirements and benefit calculations which vary for deferred retirements, early retirements, veteran retirements, ordinary disability retirements and accidental disability retirements. There is no minimum service requirement to receive these pension benefits. State-paid insurance coverage may be obtained after 25 years of service for employees in Tiers 1 through 4 and 30 years of service for Tier 5 employees.

48



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Contributions and Liability The contribution policy for PERS is set by N.J.S.A. 43:15A and requires contributions by active members and their employers. Such contributions may be amended by State legislation. Employers’ contribution amounts are based on an actuarially determined rate. The annual employer contributions include funding for basic retirement allowances and non-contributory death benefits. The employee contributions include funding for basic retirement allowances and contributory death benefits. Contributions made by the City and its employees for the previous three years are as follows:

The net pension liability was measured as of June 30, 2018 and 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating entities, actuarially determined. At June 30, 2018 and 2017, the City’s net pension liability for PERS, including the City’s proportionate share, was as follows:

Amount As a Base WagesYear Ended Paid or Percentage of Subject to Amount

December 31, Charged Base Wages Contributions Contributed

2018 2,405,855$ 14.40% 16,703,988$ 7.50% (1) 1,239,482$ 2017 2,297,652 13.62% 16,870,885 7.34% (1) 1,226,061 2016 2,179,057 13.32% 16,360,522 7.20% (1) 1,166,562

(1) These rates took effect on July 1

City Contribution Employee ContributionsAs a

Percentage ofBase Wages

Year Ended Net Pension

June 30, Rate Change Liability

2018 0.24061% 0.00043% 47,374,828$

2017 0.24018% 0.00005% 55,911,065

Proportionate Share

49



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability as of June 30, 2018 and 2017, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1% lower or 1% higher than the current rate:

Actuarial Assumptions The total pension liability for the June 30, 2018 and June 30, 2017 measurement dates were determined by actuarial valuations as of July 1, 2017 and 2016, respectively, which were rolled forward to June 30, 2018 and 2017, respectively. These actuarial valuations used the following actuarial assumptions, applied to all periods in the measurement:

At: Rate Amount Rate Amount

1% Decrease 4.66% 59,568,388$ 4.00% 69,361,471$

Current Discount Rate 5.66% 47,374,828 5.00% 55,911,065

1% Increase 6.66% 37,145,211 6.00% 44,705,210

2018 2017

June 30, 2018 June 30, 2017

Inflation Rate 2.25% 2.25%

Salary Increases:Through 2026 1.65-4.15% 1.65-4.15%

based on age based on age

Thereafter 2.65-5.15% 2.65-5.15%based on age based on age

Investment Rate of Return 7.00% 7.00%

For Measurement Date of:

50



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Actuarial Assumptions (continued) Mortality – Preretirement mortality rates were based on the RP-2000 Employee Preretirement Mortality Table for male and female active participants. For local employees, mortality tables are set back 2 years for males and 7 years for females. In addition, the tables provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary’s modified MP-2014 projection scale. Postretirement mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (set back 1 year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on mortality improvement Scale AA. In addition, the tables for service retirements and beneficiaries of former members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary’s modified MP-2014 projection scale. Disability retirement rates used to value disabled retirees were based on the RP-2000 Disabled Mortality Table (set back 3 years for males and set forward 1 year for females). The actuarial assumptions used in the July 1, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2011 to June 30, 2014. It is likely that future experience will not exactly conform to these assumptions. To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements. For the June 30, 2017 Measurement Date, preretirement mortality rates were based on the RP-2000 Employee Preretirement Mortality Table for male and female active participants (set back two years for males and seven years for females). In addition, the tables provided for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary’s modified MP-2014 projection scale. Post-retirement mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (set back one year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on mortality improvement scale AA. In addition, the tables for service retirements and beneficiaries of former members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary’s modified MP-2014 projection scale. Disability retirements used to value disables retirees were based on the RP-2000 Disabled Mortality Table (set back three years for males and set forward one year for females). The actuarial assumptions used in the July 1, 2016 valuation were based on the results o an actuarial experience study for the period July 1, 2011 to June 30, 2014.

51



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Actuarial Assumptions (continued) Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.00% at June 30, 2018 and 7.00% at 2017) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PERS target asset allocations as of June 30, 2018 and 2017 are summarized in the following table:

Asset Class 2018 2017 2018 2017Cash 5.50% 5.50% 1.00% 5.51%Absolute return/risk mitigation 5.00% 5.00% 5.51% 1.00%U.S. Treasuries 3.00% 3.00% 1.87% 1.87%Investment Grade Credit 10.00% 10.00% 3.78% 3.78%Public High Yield 2.50% 2.50% 6.82% 6.82%Global Diversified Credit 5.00% 5.00% 7.10% 7.10%Credit Oriented Hedge Funds 1.00% 1.00% 6.60% 6.60%Debt Related Private Equity 2.00% 2.00% 10.63% 10.63%Debt Related Real Estate 1.00% 1.00% 6.61% 6.61%Private Real Asset 2.50% 2.50% 11.83% 11.83%Equity Related Real Estate 6.25% 6.25% 9.23% 9.23%U.S Equity 30.00% 30.00% 8.19% 8.19%Non-U.S. Developed Markets Equity 11.50% 11.50% 9.00% 9.00%Emerging Market Equities 6.50% 6.50% 11.64% 11.64%Buyouts/venture Capital 8.25% 8.25% 13.08% 13.08%

Long-Term ExpectedTarget Allocation Real Rate of Return

June 30, June 30,

52



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Actuarial Assumptions (continued) Discount Rate - The discount rate used to measure the total pension liability was 5.66% and 5.00% as of June 30, 2018 and 2017, respectively. This single blend discount rate was based on the long-term expected rate of return on pension plan investments of 7.00% and 7.00% as of June 30, 2018 and 2017, respectively, and a municipal bond rate of 3.87% and 3.58% as of June 30, 2018 and 2017, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the contribution rate in the most recent fiscal year. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2046. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2046 and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Deferred Outflows and Inflows of Resources The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources for the years ended June 30, 2018 and 2017:

Deferred Deferred Net Deferred Deferred Deferred Net DeferredOutflows Inflows Outflow / Outflows Inflows Outflow /

of Resources of Resources (Inflow) of Resources of Resources (Inflow)

Changes of Assumptions 7,806,587$ (15,147,951)$ (7,341,364)$ 11,264,153$ (11,222,856)$ 41,297$ Difference Between Expected

and Actual Experience 903,445 (244,280) 659,165 1,316,513 - 1,316,513 Net Difference Between

Projected and Actual Earningson Pension Plan Investments - (444,378) (444,378) 380,717 - 380,717

Subtotal 8,710,032 (15,836,609) (7,126,577)$ 12,961,383 (11,222,856) 1,738,527$

Changes in Proportion 834,793 (1,073,978) 1,111,725 (1,819,796)

9,544,825$ (16,910,587)$ 14,073,108$ (13,042,652)$

June 30, 2018 June 30, 2017

53



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PERS (continued) Deferred Outflows and Inflows of Resources (continued) Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

STATE-MANAGED PENSION PLANS – PFRS Plan Description and Eligibility The PFRS was established in July, 1944, under the provisions of N.J.S.A. 43:16A to provide coverage to substantially all full time county and municipal police or firefighters and state police appointed after June 30, 1944. Membership is mandatory for such employees with vesting occurring after 10 years of membership. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is noted as follows:

Tier 1: Employees enrolled before May 22, 2010.

Tier 2: Employees enrolled after May 21, 2010 but before June 29, 2011.

Tier 3: Employees enrolled after June 28, 2011. There is no minimum salary requirement to enroll, regardless of tier. Pensionable salaries are limited to the social security maximum wage for Tier 2 and 3 employees and federal pensionable maximum for Tier 1 employees. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount.

Year EndedJune 30,

2019 269,010$ 2020 (515,032) 2021 (3,324,209) 2022 (2,889,441) 2023 (906,090)

(7,365,762)$

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Plan Benefits Service retirement benefits are available at age 55 and are generally determined to be 2% of final compensation for each year of creditable service, as defined, up to 30 years plus 1% for each year of service in excess of 30 years. Members may seek special retirement after achieving 25 years of creditable service, in which benefits would equal 65% (tiers 1 and 2 members) and 60% (tier 3 members) of final compensation plus 1% for each year of creditable service over 25 years but not to exceed 30 years. Members may elect deferred retirement benefits after achieving ten years of service, in which case benefits would begin at age 55 equal to 2% of final compensation for each year of service. Contributions and Liability The contribution policy for PFRS is set by N.J.S.A. 43:16A and requires contributions by active members and their employers. Such contributions may be amended by State legislation. Employers’ contribution amounts are based on an actuarially determined rate which includes the normal cost and unfunded accrued liability. The annual employer contributions include funding for basic retirement allowances and non-contributory death benefits. The employee contributions include funding for basic retirement allowances and contributory death benefits. Contributions made by the City and its employees for the previous three years are as follows:

Under N.J.S.A. 43:16A-15, local participating employers are responsible for their own contributions based on actuarially determined amounts, except where legislation was passed which legally obligated the State if certain circumstances occurred. The legislation which legally obligates the State is as follows: Chapter 8, P.L. 2000, Chapter 318, P.L. 2001, Chapter 86, P.L. 2001, Chapter 511, P.L. 1991, Chapter 109, P.L. 1979, Chapter 247, P.L. 1993 and Chapter 201, P.L. 2001.

Amount As a Base WagesYear Ended Paid or Percentage of Subject to Amount

December 31, Charged Base Wages Contributions Contributed

2018 11,567,534$ 29.70% 38,948,147$ 10.00% 3,894,636$ 2017 10,590,112 25.97% 40,780,333 10.00% 4,078,200 2016 10,525,623 26.25% 40,097,924 4,009,792

City Contribution Employee ContributionsAs a

Percentage ofBase Wages

10.00%

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Contributions and Liability (continued) The amounts contributed on behalf of the City under this legislation are considered to be a special funding situation. As such, the State is treated as a non-employer contributing entity. Since the City does not contribute under this legislation directly to the plan (except for employer specified financed amounts), there is no net pension liability to report in the financial statements of the City related to this legislation. However, the notes to the financial statements of the City must disclose the portion of the State’s total proportionate share of the collective net pension liability that is associated with the City. At June 30, 2018 and 2017, the City’s net pension liability for PFRS, including the special funding situation described above and changes in the City’s proportionate share, was as follows:

Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability of the as of June 30, 2018 and 2017, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1% lower or 1% higher than the current rate:

State of N.J.

(nonemployer)

Year Ended Net Pension On-Behalf

June 30, Unit Rate Change Liability of City Total

2018 Police & Fire 1.22657% 0.02345% 165,975,642$ 22,545,046$ 188,520,688$

2017 Police & Fire 1.20312% 0.01542% 185,738,728$ 20,804,302$ 206,543,030$

City (employer)

Proportionate Share

At: Rate Amount Rate Amount

1% Decrease 5.51% 222,137,800$ 5.14% 244,726,070$

Current Discount Rate 6.51% 165,975,642 6.14% 185,738,728

1% Increase 7.51% 119,652,092 7.14% 137,273,919

2018 2017

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Actuarial Assumptions

The total pension liability for the June 30, 2018 and June 30, 2017 measurement dates were determined by actuarial valuations as of July 1, 2017 and 2016, respectively, which were rolled forward to June 30, 2018 and 2017, respectively. These actuarial valuations used the following actuarial assumptions:

Mortality - – For the June 30, 2017 Measurement Date, preretirement mortality rates were based on the RP-2000 Preretirement Mortality Tables projected 13 years using Projection Scale BB and then projected on a generational basis using the plan actuary’s modified 2014 projection scales. Postretirement mortality rates for male service retirements and beneficiaries are based on the RP-2000 Combined Health Mortality Tables projected one year using Projection Scale AA and two years using the plan actuary’s modified 2014 projection scales, which was further projected on a generational basis using the plan actuary’s modified 2014 projection scales. Post-retirement mortality rates for female service retirements and beneficiaries were based on the RP-2000 Combined Healthy Mortality Tables projected 13 years using Projection Scale BB and then two years using the plan actuary’s modified 2014 projection scales, which was further projected on a generational basis using the plan actuary’s modified 2014 projection scales. Disability mortality rates were based on special mortality tables used for the period after disability retirement. The actuarial assumptions used in the July 1, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2010 to June 30, 2013.

June 30, 2018 June 30, 2017

Inflation Rate 2.25% 2.25%

Salary Increases:Through 2026 2.10-8.98% 2.10-8.98%

based on age based on age

Thereafter 3.10-9.98% 3.10-9.98%based on age based on age

Investment Rate of Return 7.00% 7.00%

For Measurement Date of:

57



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Actuarial Assumptions (continued) For the June 30, 2017 Measurement Date, mortality rates were based on the RP-2000 Combined Healthy Mortality Tables projected one year using Projection Scale BB for male service retirements with adjustments for mortality improvements from the base year based on Projection Scale BB. Mortality rates were based on the RP-2000 Combined Healthy Mortality Tables projected fourteen years using Projection Scale BB for female service retirements and beneficiaries with adjustments for mortality improvements from the base year 2014 based on Projection Scale BB. The actuarial assumptions used in the July 1, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2010 to June 30, 2013 Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.00% at June 30, 2018 and 7.00% at June 30, 2017) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PFRS target asset allocations as of June 30, 2018 and 2017 are summarized in the following table.

58



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Actuarial Assumptions (continued)

Asset Class 2018 2017 2018 2017Cash 5.50% 5.50% 1.00% 5.51%Absolute return/risk mitigation 5.00% 5.00% 5.51% 1.00%U.S. Treasuries 3.00% 3.00% 1.87% 1.87%Investment Grade Credit 10.00% 10.00% 3.78% 3.78%Public High Yield 2.50% 2.50% 6.82% 6.82%Global Diversified Credit 5.00% 5.00% 7.10% 7.10%Credit Oriented Hedge Funds 1.00% 1.00% 6.60% 6.60%Debt Related Private Equity 2.00% 2.00% 10.63% 10.63%Debt Related Real Estate 1.00% 1.00% 6.61% 6.61%Private Real Asset 2.50% 2.50% 11.83% 11.83%Equity Related Real Estate 6.25% 6.25% 9.23% 9.23%U.S Equity 30.00% 30.00% 8.19% 8.19%Non-U.S. Developed Markets Equity 11.50% 11.50% 9.00% 9.00%Emerging Market Equities 6.50% 6.50% 11.64% 11.64%Buyouts/venture Capital 8.25% 8.25% 13.08% 13.08%

Long-Term ExpectedTarget Allocation Real Rate of Return

June 30, June 30,

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Actuarial Assumptions (continued) Discount Rate - The discount rate used to measure the total pension liability was 6.51% and 6.14% as of June 30, 2018 and 2017, respectively. This single blend discount rate was based on the long-term expected rate of return on pension plan investments of 7.00% and 7.00% as of June 30, 2018 and 2017, respectively, and a municipal bond rate of 3.87% and 3.58% as of June 30, 2018 and 2017, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers and the nonemployer contributing entity will be based on the contribution rate in the most recent fiscal year. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2062. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2062, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Deferred Outflows and Inflows of Resources The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources (excluding employer specific amounts) for the years ended June 30, 2018 and 2017:

Deferred Deferred Net Deferred Deferred Deferred Net DeferredOutflows Inflows Outflow / Outflows Inflows Outflow /

of Resources of Resources (Inflow) of Resources of Resources (Inflow)

Changes of Assumptions 14,246,776$ (42,536,692)$ (28,289,916)$ 22,903,654$ (30,418,573)$ (7,514,919)$ Difference Between Expected

and Actual Experience 1,688,586 (686,846) 1,001,740 1,204,964 (1,090,132) 114,832 Net Difference Between

Projected and Actual Earningson Pension Plan Investments - (908,037) (908,037) 3,544,330 - 3,544,330

Subtotal 15,935,362 (44,131,575) (28,196,213)$ 27,652,948 (31,508,705) (3,855,757)$

Changes in Proportion 5,896,392 (723,599) 4,332,289 (1,196,536)

21,831,754$ (44,855,174)$ 31,985,237$ (32,705,241)$

June 30, 2018 June 30, 2017

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS – PFRS (continued) Deferred Outflows and Inflows of Resources (continued) Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

STATE-MANAGED PENSION PLANS - GENERAL The State established and administers a Supplemental Annuity Collective Trust Fund (SACT) which is available to active members of several State-administered retirement systems to purchase annuities to supplement the guaranteed benefits provided by their retirement system. The State or local government employers do not appropriate funds to SACT. The State also administers the Pension Adjustment Fund (PAF) which provides cost of living increases, equal to 60 percent of the change in the average consumer price index, to eligible retirees in all State-sponsored pension systems except SACT. The cost of living increases for PFRS and PERS are funded directly by each of the respective systems and are considered in the annual actuarial calculation of the required State contribution for that system. According to state statutes, all obligations of PERS and PFRS will be assumed by the State of New Jersey should the PERS and PFRS be terminated.

Year EndedJune 30,

2018 1,706,913$ 2019 (3,786,087) 2020 (11,401,388) 2021 (7,157,705) 2022 (2,385,153)

(23,023,420)$

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) STATE-MANAGED PENSION PLANS - GENERAL The State of New Jersey issues publicly available financial reports that include the financial statements and required supplementary information of the PERS and PFRS. This report may be obtained by writing to the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey 08625-0295. Detailed information about the pension plans’ fiduciary net position are available in the separately issued financial reports. These reports may be accessed via the New Jersey Division of Pension and Benefits website at www.state.nj.us/treasury/pensions. STATE-MANAGED PENSION PLANS – DEFERRAL Legislation, known as Chapter 19 of the Public Laws of 2009 (P.L. 2009, c. 19), was enacted and effective on March 17, 2009 allowing for an adjustment in the contributions that local employers, such as the City, must make to the PERS and PFRS during the year ended June 30, 2009. Under this legislation, local governments were given the option to defer exactly 50% of their required pension contribution as certified by the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits or pay the full amount of the required contribution for the year ended June 30, 2009. The City elected the 50% deferral in the amount of $4,568,624. Under the terms of the pension deferral the City is obligated to commence repayment of the entire deferral in 15 amortized annual installments, commencing with the year ended December 31, 2012. These payments will be added to the regular pension bills. The short term liability of the deferral, payable on April 1, 2018, is $703,635, consisting of $613,524 on the PFRS deferral and $90,111 on the PERS deferral.

DEFINED CONTRIBUTION RETIREMENT PROGRAM The Defined Contribution Retirement Program (DCRP) was established under the provisions of P.L. 2007, Chapters 92 and 103 and expanded under the provisions of Chapter 89, P.L. 2008 and Chapter 1, P.L. 2010. It provides eligible members with a tax-sheltered, defined contribution retirement benefit along with life insurance and disability coverage.

62



NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) DEFINED CONTRIBUTION RETIREMENT PROGRAM (continued) Individuals eligible for membership in the DCRP include (a) state or local officials elected or appointed or elected to new office on or after July 1, 2007, (b) employees enrolled in PERS on or after July 1, 2007 or PFRS after May 21, 2010 who earn salary in excess of established maximum compensation limits and (c) employees otherwise eligible for PERS on or after November 2, 2008 or PFRS after May 21, 2010 that earn below the minimum PERS or PFRS salary but more than $5,000 annually. Participation in DCRP can be irrevocably waived if an official earns less than $5,000. Vesting occurs upon commencement of the third year of membership. Should the vesting period not be reached, contributions will be refunded to the appropriate contributing parties. Employer matching contributions and earnings are only available after the age of 55. Distributions render the member retired and ineligible for future participation in any State-administered plans. Otherwise, distributions are available at any time as lump sum, fixed term or life annuity. Members are covered by employer-paid life insurance in the amount of 1 ½ times the annual base salary on which DCRP contributions were based. Members are also eligible for employer-paid long-term disability coverage after one year of participation. Eligibility occurs after six consecutive months of total disability. Members would receive a regular monthly income benefit up to 60% of the base salary on which DCRP contributions were based during the 12 months preceding the onset of the disability, offset by any other periodic benefit the member may be receiving. Benefits will be paid until the age of 70 so long as the member remains disabled and has not begun receiving retirement annuity payments. The following table represents the City and employee contributions during the previous three years:

YearEnded Amount Rate Amount Rate

Dec. 31, 2018 50,452$ 5.5% 29,122$ 3.0%Dec. 31, 2017 53,390 5.5% 29,122 3.0%Dec. 31, 2016 52,499 5.5% 28,636 3.0%

Employee Contributions City Contribution

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NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued) DEFERRED COMPENSATION PLAN (unaudited) The City has established a deferred compensation program (the “plan”) for its employees under Section 457 of the Internal Revenue Code. The plan is comprised of several separate plans, all of which are Public Employees' Deferred Compensation Plans, covering employees and elected officials who perform services for the City. One plan is underwritten by The Hartford Financial Services Group, Inc. (now called Mass Mutual), the others by Variable Annuity Life Insurance Company (“VALIC”), AXA Equitable, ING (now called VOYA) and the Metropolitan Life Insurance Company. The Plans are a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salaries, before federal taxes, to a retirement account. Contributions, or deferrals, are made through payroll deductions. Individuals are 100% vested. Distributions are not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are solely property and rights of the individual contributors and are not subject to the claims of the City's general creditors. NOTE G. POST-EMPLOYMENT BENEFITS POST-EMPLOYMENT BENEFITS PLAN Plan Description – The City contributes to the State Health Benefits Program (SHBP), a cost-sharing, multiple-employer defined benefit post-employment healthcare plan administered by the State of New Jersey Division of Pensions and Benefits. SHBP was established in 1961 under N.J.S.A. 52:14-17.25 et seq., to provide health benefits to State employees, retirees and their dependents. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code. SHBP provides medical, prescription drugs, mental health/substance abuse, and Medicare Part B reimbursement to retirees and their covered dependents. The SHBP was extended to employees, retirees and dependents of participating local public employers in 1964. Local employers must adopt a resolution to participate in the SHBP. In 1964, the City authorized participation in the SHBP’s post-retirement benefit program. The City currently provides lifetime medical benefits to City employees who retire from the City under the following conditions: (a) after twenty five years of service with the City, or (b) upon a disability retirement. Coverage is also provided for eligible family members of the employee and paid by the City for the life of the retiree.

64



NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) Retirees receiving these benefits have deducted from their monthly pension payments the cost of their health benefits. The City reimburses employees for the cost of their post-employment benefit plans in amounts dependent n the contract on which the employee retires. Due to this arrangement, valuation reports prepared by the State of New Jersey to allocate each participating local government’s share of the post-employment benefit liability do not include a liability for the City of Bayonne. However, former employees of the dissolved Bayonne Municipal Utilities Authority (BMUA) do not have retiree health benefit premiums deducted from their pensions. Because of the dissolution, the City has assumed all BMUA liabilities. The City’s share of the OPEB liability noted in the paragraphs that follow represent the liability arising from the former BMUA employees. The State Health Benefits Commission is the executive body established by statute to be responsible for the operation of the SHBP. The State of New Jersey Division of Pensions and Benefits issues a publicly available financial report that includes financial statements and required supplementary information for the SHBP. That report may be obtained by writing to: State of New Jersey Division of Pensions and Benefits, P.O. Box 295, Trenton, NJ 08625-0295 or by visiting their website at www.state.nj.us/treasury/pensions. Funding Policy – Participating employers are contractually required to contribute based on the amount of premiums attributable to their retirees. Post-retirement medical benefits under the plan have been funded on a pay-as-you-go basis since 1994. Prior to 1994, medical benefits were funded on an actuarial basis. Contributions to pay for the health premiums of participating retirees in the SHBP are billed to the City on a monthly basis. Chapter 78, P.L. 2011, effective June 28, 2011, established new employee contribution requirements towards the cost of employer-provided health benefit coverage. Employees are required to contribute a certain percentage of the cost of coverage. The rate of contribution is determined based on the employee’s annual salary and the selected level of coverage. The increased employee contributions will be phased in over a 4-year period for those employed prior to Chapter 78’s effective date with a minimum contribution required to be at least 1.5% of salary. For those employed on or after June 28, 2011, the 4-year phase-in does not apply and contributions based on the full percentage rate of contribution are required. Under Chapter 78, certain future retirees eligible for employee-paid health care coverage at retirement will also be required to pay a percentage of the cost of their medical coverage determined on the basis of their annual retirement benefit. This legislation expired on 12/31/16 and has not been renewed.

65



NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pensions, (“GASB 75”), is effective for fiscal years beginning after June 15, 2017, and replaces the requirements of GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefit Plans Other Than Pensions. Under GASB 75, the City would recognize the cost of other postemployment benefits (OPEB) in the year when the employee services are received and report the accumulated liability for OPEB on the face of its financial statements. Under the regulatory basis of accounting prescribed by the Division, the City is not required to recognize the cost of OPEB in the year when the employee services were received, or report the accumulated liability on the face of its financial statements. However, disclosure of such amounts is required. Retiree Contributions – Future retirees who do not fall under the grandfathering provisions of Chapter 78 of the 2011 Pension and Health Benefit Reforms will be required to contribute to the costs of their retiree health care. Participant contributions are based on salary level and pension benefit amounts and are phased in as a percentage based on salary or pension earnings. Grandfathered participants include those with greater than 20 years of service as of June 28, 2011 who retire with 25 years of service with the City, or who reached age 62 as of that date with 15 years of service will receive benefits at no cost to the participant. Net OPEB Obligation – The components of the net OPEB liability of the City at June 30, 2018 was as follows:

2018City's Share of:

Total OPEB Liability 1,079,767$ OPEB Plan fiduciary net position 20,860

Net OPEB liability 1,058,907$

Plan fiduciary net position as a percentage of total OPEB liability 1.97%

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NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of June 30, 2017 which was rolled forward to June 30, 2018. The actuarial assumptions vary for each plan member depending on the pension plan the member is enrolled in. This actuarial valuation used the following actuarial assumptions, applied to all periods in the measurement:

Preretirement mortality rates were based on the RP-2006 Headcount-Weighted Healthy Employee Male/Female mortality table with fully generational mortality improvement projections from the central year using the MP-2017 scale. Postretirement mortality rates were based on the RP-2006 Headcount-Weighted Healthy Annuitant Male/Female mortality table with fully generational improvement projections from the central year using the MP-2017 scale. Disability mortality was based on the RP-2006 Headcount-Weighted Disabled Male/Female mortality table with fully generational improvement projections from the central year using the MP-2017 scale. Certain actuarial assumptions used in the June 30, 2017 valuation were based on the results of the pension plans’ experience studies for which the members are eligible for coverage under this Plan- the Police and Firemen Retirement System (PFRS) and the Public Employees’ Retirement System (PERS). The PFRS and PERS experience studies were prepared for the periods July 1, 2010 to June 30, 2013 and July 1, 2011 to June 30, 2014, respectively. 100% of active members are considered to participate in the Plan upon retirement.

2018

Inflation Rate 2.50%

Salary increases:Through 2026 1.65% to 8.98%Thereafter 2.65% to 9.98%

67



NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) Health Care Trend Assumptions – For pre-Medicare preferred provider organization (PPO) and health maintenance organization (HMO) medical benefits, the trend rate is initially 5.8% and decreases to a 5.0% long-term trend rate after eight years. For self-insured post-65 PPO and HMO medical benefits, the trend rate is 4.5%. For prescription drug benefits, the initial trend rate is 8.0% decreasing to a 5.0% long-term trend rate after seven years. The Medicare advantage trend rate is 4.5% and will continue in all future years. Discount Rate – The discount rate for June 30, 2018 was 3.87%. This represents the municipal bond return rate as chosen by the State. The source is the Bond Buyer Go 20-Bond Municipal Bond Index, which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. As the long-term rate of return is less than the municipal bond rate, it is not considered in the calculation of the discount rate, rather the discount rate is set at the municipal bond rate. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the City’s share of the SHBP net OPEB liability as of June 30, 2018, calculated using the discount rate as disclosed above as well as what the net OPEB liability would be if it was calculated using discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

At: Rate Amount

1% Decrease 2.87% 1,242,378$

Current Discount Rate 3.87% 1,058,907

1% Increase 4.87% 912,355

2018

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NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rate The following presents the City’s net OPEB liability as of June 30, 2018, calculated using the Healthcare trend rate as disclosed above as well as what the net OPEB liability would be if it was calculated using a healthcare trend rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Deferred Outflows and Deferred Inflows of Resources The OPEB expense and deferred outflows and deferred inflows of resources at June 30, 2018 were as follows:

2018

At:

1% Decrease 883,298$

Current Discount Rate 1,058,907

1% Increase 1,286,171

Deferred Deferred Net DeferredOutflows Inflows Outflow /

of Resources of Resources (Inflow)

Changes of Assumptions -$ (268,606)$ (268,606)$ Difference Between Expected

and Actual Experience - (214,996) (214,996) Net Difference Between

Projected and Actual Earningson OPEB Plan Investments 560 - 560 Changes in Proportion - (818,508) (818,508)

560$ (1,302,110)$ (1,301,550)$

June 30, 2018

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NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) The amounts reported as a deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

OPEB Expense The components of allocable OPEB expense, which exclude OPEB expense related to specific liabilities of individual employers, for the year ending June 30, 2018 are as follows:

Special Funding Situation In regards to the City’s enrollment in the SHBP, under Chapter 330, P.L. 1997, the State shall pay the premium or periodic charges for the qualified local police and firefighter retirees and dependents equal to 80 percent of the premium or periodic charge for the category of coverage elected by the qualified retiree under the State managed care plan or a health maintenance organization participating in the program providing the lowest premium or periodic charge. The State also provides funding for retiree health benefits to survivors of local police officers and firefighters who die in the line od duty under Chapter 271, P.L.1989.

Year EndedJune 30,

2019 (182,228)$ 2020 (182,228) 2021 (182,228) 2022 (182,228) 2023 (182,368)

Thereafter (390,268)

(1,301,550)$

2018

Proportionate Share of Allocable 41,212$ Allocable Plan OPEB Expense

Net Amortizations of DeferredAmounts from Changes in Proportion (131,121)

OPEB Expense (89,909)$

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NOTE G. POST-EMPLOYMENT BENEFITS (continued) POST-EMPLOYMENT BENEFITS PLAN (continued) Therefore, the City is considered to be in a special funding situation as defined by GASB Statement No. 75 and the State is treated as a non-employer contributing entity. Since the City does not contribute under this legislation directly to the plan, there is no net OPEB liability, deferred outflows of resources or deferred inflows of resources to report in the financial statements of the local participating employers related to this legislation. The State’s share of the net OPEB liability associated with the City is $75,442,659, which represents 345 plan members, constituting 1.214106% of the State’s total proportionate share of net OPEB liability. NOTE H. COMPENSATED ABSENCES Employees may accumulate unlimited sick time. Upon retirement, union employees with a minimum of 100 accrued sick days may receive a cash payment of one-third of accumulated sick time up to a maximum of $12,500. Employees may carry vacation over for only one year. Upon termination or retirement, employees may receive a cash payment for the full value of their accumulated vacation time. As of December 31, 2018 and 2017, the total accumulated absence liability was $6,010,175 and $6,198,769, respectively. No funds are reserved for accumulated absences, however, the City budgets compensated absence appropriations annually in the applicable department line items.

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NOTE I. RISK MANAGEMENT Insurance Coverage The City is exposed to various property and casualty risks including: property damage caused to any of the City’s property, motor vehicles, equipment or apparatus; liability resulting from the use or operation of such motor vehicles, equipment apparatus; liability from the City’s negligence, including that of its officers, employees and servants; and workers’ compensation obligations. The City established a self-insurance program in accordance with New Jersey Statute Chapter 40:10-6. The Chapter enables the governing body of any local unit to create a fund to provide insurance coverage for its exposure to a wide variety of property casualty risks, including property damage caused to any of the unit's property, motor vehicles, equipment or apparatus; liability resulting from the use or operation of such motor vehicles, equipment or apparatus; liability for the unit's negligence, including that of its officers, employees and servants and workers' compensation obligations. On August 17, 2011, the City authorized participation in and the execution of an Indemnity and Trust Agreement with the New Jersey Intergovernmental Insurance Fund (the “NJIIF”) for the provision of property and casualty insurance coverage. The NJIIF is a public entity created in 1991 and offers coverage to municipalities, counties, and school districts statewide. The NJIIF is a New Jersey approved, self-insured, reinsured public entity insurance pool which offers all New Jersey public entities multiple lines of insurance. The City has obtained the following coverage through the NJIIF:

Equipment Breakdown coverage in the amount of $100,000,000.

Crime coverage including employee dishonesty, forgery, alterations, theft, robbery and fraud in the amount of $1,000,000.

Environmental Impairment coverage in the amount of $20,000,000.

Workers’ Compensation coverage in the amount of $2,000,000.

General, Automobile and Employee Benefits liability coverage in the amount of $15,000,000.

Public Entity Management Liability coverage, including Public Official’s Liability and Employment Practices Liability coverage, in the amount of $10,000,000.

Surety bonds for the City Treasurer, Chief Financial Officer, Tax Collector and Municipal Court Judges.

Disaster Recovery The City does not have a formal disaster recovery plan in place, however, all financial data is backed up to hard disks daily.

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NOTE J. STATE AID RECEIVABLE – QUALIFIED BONDS The Division required municipalities reverting to a calendar year to anticipate a full year of State Aid during the six month transition year. The City receives State Aid in two forms: cash payments and qualified bond payments in lieu of direct aid in cash. Qualified bonds are State Aid payments withheld by the State and forwarded directly to paying agents for principal and interest payments on the bonds. During the transition year ended December 31, 2011, the City certified qualified bond maturity schedules for the twelve month period of July 1, 2011 to June, 30, 2012, six months beyond the end of the transition year. As a result, the City recognized State Aid revenues in the amount of $3,357,695 for debt service payments of the succeeding year, resulting in prepaid debt service at year end. The following schedule summarizes the State Aid received, qualified bond payments applied and the prepaid amounts as of December 31, 2018 and 2017.

NOTE K. CLEARING ACCOUNT The City maintains a claims account, or a cash clearing bank account, from which bills are paid for various funds.

Beginning Balance 2,355,290$ 2,478,858$

Add: State Aid (1) 8,829,801 8,829,801 11,185,091 11,308,659

Less Received in Cash 1,444,896$ 1,925,970$ Qualified Bond Payments 7,344,246 7,027,399

8,789,142 8,953,369

Ending Balance 2,395,949$ 2,355,290$

STATE AID RECEIVABLE - QUALIFIED BONDS

Year Ended Dec. 31, 2017Year Ended Dec. 31, 2018

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NOTE L. FIXED ASSETS

In accordance with accounting practices prescribed by the Division, and as further detailed in Note A, no depreciation has been provided for and fixed assets acquired through grants in aid or contributed capital have not been accounted for separately. Fixed assets were not updated by the City for the year ended December 31, 2018, therefore there is no activity to report. The City had the following investment balances in general fixed assets for and as of the year ended December 31, 2018.

NOTE M. DEFERRED CHARGES TO BE RAISED IN SUCCEEDING BUDGETS There were certain prior year bills that were not appropriated for. As of December 31, 2018, the following deferred charges are shown on the balance sheets of the Current Fund:

Balance, Balance,Dec. 31, 2017 Dec. 31, 2018

Land 166,394,147$ 166,394,147$ Buildings 10,233,265 10,233,265 Improvements 93,129,774 93,129,774 Machinery, Equipment

and Other 22,680,578 22,680,578 292,437,764$ 292,437,764$

Balance, Balance,Dec. 31, 2017 Current Year Prior Year Dec. 31, 2018

Loans Payable 202,391$ 26,505$ 71,647$ 104,239$ Tax Map 217,150 43,430 - 173,720

419,541$ 69,935$ 71,647$ 277,959$

Budget Appropriations

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NOTE N. INTERFUND TRANSACTIONS The City has various transactions by and between its individual funds. Certain accounts of the Trust and Capital Funds earn interest which is required to be recorded as revenue in the Current Fund budget. Other transactions include budget appropriations in the Current Fund which are required to be turned over to the Federal and State Grant, Trust and Capital Funds. All these transfers are routine and are consistent with the activities of the funds making the transfers. Current Fund and Parking Utility Operating interfunds receivable are fully reserved and recognized as credits to operations in the year the interfunds are received in cash. Interfunds receivable in the Trust Funds, General Capital Fund and Parking Utility Operating Fund are not reserved. The City expects all balances to be repaid by year-end with the exception of the interfund between the Current Fund and Federal and State Grants Fund. The Federal and State Grants Fund does not have its own bank account, therefore, the activity of the Fund is run through the Current Fund. As of and during the year ended December 31, 2018, the Current Fund had the following interfund activity and receivable/payable balances at year end:

General Other Utility Tax Lien Dog Housing & UrbanCapital Grants Trust Operating Redemption Trust DevelopmentFund Fund Fund Fund Trust Fund Fund Grant Fund

Balance: December 31, 2017 24,229$ (758,236)$ 20,492$ (300,941)$ (4,206)$ 35,611$ -$

Increased by:

Grants Appropriation - 2,868,335 - - - - - Statutory Excess - - - - - 11,490 - Appropriation Cancelled - 219,196 - - - - - Revenue Realized - 351,515 120,000 - - - - Cash Disbursements 367,845 3,276,344 570,712 1,063,329 4,206 - 163,400

392,074 5,957,154 711,204 762,388 - 47,101 163,400

Decreased by:Grant Revenue - 2,868,335 - - - - - Budget Appropriation - Capital Improvement 100,000 - - - - - - Receivable Cancelled - 224,783 - - - - - Reserve for Other 163,413 - 113,392 - - - - Premium on Sale of Bonds and Notes 220,544 - - - - - - Cash Receipts - 4,165,179 - 751,695 - 18,709 -

483,957 7,258,297 113,392 751,695 - 18,709 -

Balance: December 31, 2018 (91,883)$ (1,301,143)$ 597,812$ 10,693$ -$ 28,392$ 163,400$

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NOTE N. INTERFUND TRANSACTIONS (continued) In addition to the Current Fund interfund activity noted on the previous page, the City also had the following interfund activity and balances as of and for the year ended December 31, 2018:

NOTE O. RELATED PARTY TRANSACTIONS SHARED SERVICE AGREEMENTS Bayonne Board of Education The City has an agreement with the Bayonne Board of Education in which the City is to receive reimbursement for garbage contracts. As of December 31, 2018 and 2017, the City has receivables from the Bayonne Board of Education of $104,000 and $52,000. This receivable is part of the revenue accounts receivable identified on the balance sheet and has been fully reserved. As described in Note D, prior to January 2015 the Bayonne Board of Education was a Type I School District, therefore, bonds and notes authorized by the Board of Education are general obligations of the City and are reported on the balance sheet of the City’s General Capital Fund and are accordingly included in the summary of municipal debt. The City budgets the principal and interest payments of the Board of Education’s obligations as they become due. These obligations are funded by the City through an amount to be raised by taxation called “addition to local district school tax”, less any regular school debt service aid received from the State of New Jersey.

UtilityCapital

Due to Utility Capital Fund at Dec. 31, 2017 397,920$ Increased by:

Cash receipts 896 Budget Appropriation:

Capital Improvement Fund 50,000

448,816

Decreased by:

Cash Disbursements 452,393

Due from Utility Capital Fund at Dec. 31, 2018 (3,577)$

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NOTE O. RELATED PARTY TRANSACTIONS (continued) Bayonne Board of Education (continued) For the year ended December 31, 2018 and 2017, the City’s budget included the following debt service requirements of the Board of Education:

The City’s Parking Utility Fund has a payable due to the Board of Education of $450,000 for the acquisition of a parking lot. NOTE P. REVENUE ACCOUNTS RECEIVABLE Revenue accounts receivable are fully reserved receivables due from entities for revenues anticipated in support of the City’s budget. The following table illustrates activity of the beginning and ending revenue accounts receivable balances for the year ended December 31, 2018:

(1) The receivables are further discussed in Note O.

Dec. 31, 2018 Dec. 31, 2017Debt Service Requirements of the Board of Education:

Payment of Bond Principal 6,755,362$ 6,379,817$ Interest on Bonds 3,866,144 3,852,977

Balance for Support of Board of Education:Addition to Local District School Tax 10,621,506$ 10,232,794$

Year Ended

Balance Current Year BalanceDec. 31, 2017 Accruals Collections Dec. 31, 2018

Fines and Costs - Municipal Court 292,952$ 2,138,547$ 2,138,547$ 292,952$ Payments in Lieu of Taxes

Bayonne Housing Authority 350,000 312,590 312,590 350,000 BHA Post Road Gardens 57,192 - - 57,192 Senior Horizons of Bayonne 49,641 49,889 49,889 49,641 Bayonne Community Action 7,000 10,911 10,911 7,000

Reimbursement for:Bayonne BOE Garbage Contract 52,000 52,000 - 104,000 Forestry Expenses 175,000 - - 175,000 Municipal Debt Service 42,500 42,500 - 85,000

1,026,285$ 2,606,437$ 2,511,937$ 1,120,785$

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NOTE Q. ECONOMIC DEPENDENCY Major Taxpayers The City does not have significant economic dependence on any one taxpayer. Below, the ten largest taxpayers of the City is listed based on largest tax assessment.

Peninsula at Bayonne Harbor The City has relied on many one-time revenues and structural imbalance offsets to balance their budget. Since the BLRA was dissolved, the City will be receiving annual payments from the Port Authority of $5,000,000 in 2018 and annual payments of $5,000,000 from 2019 through 2024. Originally, the deal was for the City to receive annual payments of $5,000,000 through the year 2033. In 2016 the City finalized an agreement that they would sell off nine years worth of payments to a third party in order to fill an unexpected budget gap. The City received $27,317,407 in 2016. The City plans to make use of funding from Spectra Energy, Bayonne Energy Center, new PILOTs, fund balance, and the continued sale of property and development at the Peninsula at Bayonne Harbor to provide additional revenues. Taking into consideration legislation capping the City’s ability to increase its tax levy, the impact on the City’s operations would be significant should the City be unable to obtain adequate replacement revenues.

Name Assessment

Bayonne Industries Inc/IMTT 116,806,400$ Bayonne Auto Terminal, LLC 23,095,700 Gordon Terminal Serv Co of NJ Inc 13,453,500 Texaco Downstream Properties Inc. 12,388,300 Exxon Corporation 12,291,000 Bayonne Bay Dvlprs Urbn Rnwl, LLC 12,233,600 NJIND Hook Road, LLC 9,000,000 MPT of Bayonne, LLC 8,000,000 Buckeye Bayonne Terminal LLC 7,800,000 South Cove Development, LLC 7,294,100

222,362,600$

Top 10 Taxpayers

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NOTE Q. ECONOMIC DEPENDENCY (continued) In the 2018 budget, the City included the sale of municipal owned land of $6,050,000, which is a one-time revenue, and budgeted $12,500,000 in surplus which the City believes will be regenerated through its 2018 operations. The City realized $25,181,501 of revenue from the sale of municipal owned land in 2018. State Aid The City is also a recipient of State Aid. During the year ended December 31, 2018 and 2017, State Aid accounted for 5.7% and 5.7%, respectively, of the support the City’s budget. Significant changes in State Aid policy, in conjunction with legislation capping increases to the tax levy, could further impact the City’s operations. NOTE R. LEASE/LOAN COMMITMENTS In 2004, the City entered into a financing lease with the Hudson County Improvement Authority in the amount of $10,000,000 to fund improvements to the City’s public works garage. On June 24, 2015 the City refunded the remaining $8,300,000 and entered into a new financing lease with the Hudson County Improvement Authority in the amount of $8,850,000. The minimum future lease payments are as follows:

Year EndedDecember 31, Principal Interest

2019 340,000$ 351,400$ 2020 355,000 339,200 2021 365,000 324,800 2022 380,000 309,900 2023 395,000 294,400

2024-2028 2,240,000 1,194,713

2029-2033 2,840,000 570,863

2034 660,000 17,737

7,575,000$ 3,403,013$

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NOTE R. LEASE/LOAN COMMITMENTS (continued) On May 15, 2012, the City entered into a loan agreement with the Bayonne City Federal Credit Union for a fire truck. The loan was in the amount of $177,028 bearing an interest rate of 5.25% for 10 years. The minimum future loan payments are as follows:

On August 9, 2012, the City entered into a loan agreement with the Bayonne City Federal Credit Union for a rescue vessel. The loan was in the amount of $77,187 bearing an interest rate of 5.25% for 10 years. The minimum future loan payments are as follows:


2019 19,522$ 3,269$ 2020 20,565 2,226

2021 21,678 1,113

2022 9,373 123

71,138$ 6,731$

Year Ended

December 31, Principal Interest

2019 8,408$ 1,537$ 2020 8,856 1,088 2021 9,336 609 2022 6,501 128

33,101$ 3,362$

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NOTE R. LEASE/LOAN COMMITMENTS (continued) On February 19, 2015, the City entered into a loan agreement with the Bayonne City Federal Credit Union for eight police vehicles. The loan was in the amount of $309,002 bearing an interest rate of 3.25% for 4 years. The minimum future loan payments are as follows:

On September 29, 2016, the City entered into a loan agreement with the Bayonne City Federal Credit Union for ten police vehicles. The loan was in the amount of $378,696 bearing an interest rate of 2.99% for 4 years. The minimum future loan payments are as follows:


2019 4,820$ 53$

4,820$ 53$

Year Ended

December 31, Principal Interest

2019 91,097$ 3,577$ 2020 70,126 879

161,223$ 4,457$

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NOTE S. TAX ABATEMENTS The City negotiates property tax abatement agreements on an individual basis.

The full amount to be raised by taxes for support of each Government’s budget is levied on properties not subject to such agreements, therefore there is no aggregate reduction of tax revenue to the Governments as a result of the abatement. These agreements were negotiated under the Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq. (the Law), which authorizes municipalities to enter into financial agreements with Urban Renewal Entities. An Urban Renewal Entity is a limited-dividend entity or a nonprofit entity which undertakes redevelopment projects (both commercial and residential), relocation projects for residents displaced by the redevelopment area, and low and moderate income housing projects in return for tax exemptions, or payments in lieu of taxes referred to as “annual service charges”. The Law allows annual service charges to be calculated as a percentage of either gross revenue from each unit of the project or from total project cost, if the project is not undertaken in units. In the case of low and moderate income housing projects, the annual service charge shall not exceed 15% of annual gross revenue or 2% of total project cost. For all other projects, the annual service charge shall not be less than 10% of annual gross revenue or 2% of total project cost. The City’s abatements are across in multiple categories. There are a total of five stages in the abatement period. The final four phases require the Urban Renewal Entity to remit the greater of the agreed upon annual service charge or 20%, 40%, 60% and 80%, respectively, of the amount of taxes otherwise due on the value of the land and improvements. The Law only allows for taxes on improvements to be abated. Taxes on land are billed quarterly to the Urban Renewal Entity and are credited against the annual service charges due. To administer the billing, the land value and improvement value of the abated property are separate line items in the tax assessment and collection records. The land value is billed quarterly at the total property tax rate. The improvement value is classified as exempt property (Class 15F), generating no bill.

Received for AggregateTaxes if Billed Payments in Payments Reduction of

Taxing at Full 2018 Lieu of Taxes to Other GovernmentPurpose of Agreements Government Tax Rate & Land Tax Governments Amount (%) Revenue

Construction of Commercial and School 8,059,066$ -$ -$ 8,059,066$ 100% -$ Residential Redevelopment Projects, County 2,774,506 - 138,725 2,635,781 95% - Low and Moderate Income Housing City 8,121,818 6,940,400 (138,725) 1,320,143 16% - Projects and Relocation Projects Total 18,955,390$ 6,940,400$ -$ 12,014,990$ 63% -$

Budget Revenues 6,930,400$ Non-Budget Revenues 10,000

6,940,400$

Taxes Abated

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NOTE S. TAX ABATEMENTS (Continued) Under the Law, abatements may provide for an exemption period of less than 30 years from the completion of the entire project or less than 35 years from the execution of the financial agreement. Further, Urban Renewal Entity profits are restricted and any excess profits are payable to the municipality as an additional annual service charge. The Law does not provide for the recapture of abated taxes in the event an abatement recipient does not fulfill the commitment it makes in return for the tax abatement. However, in the event of default, the City has the right to proceed against the property pursuant to the In Rem Tax Foreclosure Act, N.J.S.A. 54:5-1 and/or may terminate the agreement. The City has not made any commitments as part of the agreements other than to reduce taxes. The City is not subject to any tax abatement agreements entered into by other governmental entities. NOTE T. CONTINGENT LIABILITIES The Water/Sewer System In December 2012, the City of Bayonne and the Bayonne MUA entered into a Concession Agreement with Bayonne Joint Venture, LLC (“BJV”), a for-profit entity, whereby BJV acquired a 40 year concession to use, operate, manage, construct, maintain and improve its water system. As such, BJV is responsible for all expenses of operations of the Bayonne water system, including payments to the Commission of its share of the operating expenses and debt service on behalf of Bayonne. Nonetheless, under its water supply agreement, the City of Bayonne remains responsible to the Commission in case of any shortfall of operating or debt service payments from BJV. As described in Note A, the BMUA is considered a component unit of the City until it was dissolved on December 31, 2016. From its inception through the date the BMUA was dissolved, the agreement has never been called upon by the BMUA. Redeveloper Agreement On February 20, 2013, the City adopted an ordinance approving a financial instrument and authorizing the execution thereof and other applicable documents related to the issuance by the City of Bayonne of $17,500,000 Redevelopment Area Bonds (non-recourse to the full faith and credit of the City of Bayonne) and determining various other matters in connection therewith. This ordinance was adopted to assist Prince Holdings of Bayonne Urban Renewal Enterprise, LLC (the “Redeveloper”) in financing the development, design, finance and construction of approximately 250,000 square feet of industrial warehouse space and associated loading docks and parking, infrastructure improvements and related site work (the “Project”).

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NOTE T. CONTINGENT LIABILITIES (continued)

To assist the Redeveloper in financing the Project costs as set forth in the redevelopment agreement, the City, as redevelopment entity, will issue bonds pursuant to the Redevelopment Area Bond Financing Law, N.J.S.A. 40A:12-64, et seq. Pursuant to the Bond Financing Law, the City intends to pledge, to the extent required, the annual service charges paid to the City by the Redeveloper for debt service on the Bonds provided, however, that five percent (5%) of the annual service charges shall not be subject to such pledge in accordance with N.J.S.A. 40A:20-12 (the “County Share”). The City and the Redeveloper have agreed that any portion of the annual service charges paid by the Redeveloper to the City in excess of the amount needed to pay the County Share and Debt Service on the bonds shall be returned to the City and retained and used by the City for any lawful purpose. Tax Appeals The City is a defendant in various tax appeals that they are defending vigorously. The tax appeals it is currently defending are not unusual for a municipality of its size. In the past, the City has funded these appeals through various means, including utilizing the reserve for tax appeals account, which is funded through budget appropriations, issuing refunding notes to pay for the appeals, direct appropriations and charges to operations. The Local Finance Board has allowed the City to issue tax refunding obligations to finance the tax refunds. They are renewable annually for five to seven years after their date of issuance, with the amortization schedule approved by the Local Finance Board. During the year ended December 31, 2018, the City renewed previously issued tax refunding notes. Also during the year ended December 31, 2018, the City funded additional appeals by appropriating and expending $700,000 in the current budget and charging $311,544 to improvement authorizations in the general capital fund.

Arbitrage Rebate The City is subject Section 148 of Internal Revenue Code, which was enacted to minimize the arbitrage benefits from investing gross proceeds of tax-exempt bonds in higher yielding investments and to remove the arbitrage incentives to issue more bonds, to issue bonds earlier, or to leave bonds outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes for which the bonds were issued.

Affordable Housing The State has passed legislation which would seize uncommitted affordable housing funds from municipalities. After rounds of appeals and court orders, the Appellate Division has ruled that the State can seize such funds, assuming proper notice and the ability for municipalities to contest the State’s findings are provided. The extent of the City’s Affordable Housing funds subject to seizure by the State, if any, is uncertain. As of December 31, 2018 and 2017, the City had balances of $1,098,136 and $609,382, respectively, in its Affordable Housing Trust.

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NOTE T. CONTINGENT LIABILITIES (continued) Grant Programs The City participates in several federal and state financial assistance grant programs. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditures of funds for eligible purposes. The state and federal grants received and expended in the year ended December 31, 2018 were subject to the Uniform Guidance and State of New Jersey OMB Circular 15-08 which mandates that grant revenues and expenditures be audited in conjunction with the City’s annual audit. In addition, these programs are also subject to compliance and financial audits by the grantors or their representatives. As the result of an audit of the City’s Community Development Block Grant (CDBG), the U.S. Department of Housing and Urban Development (HUD) notified the City during the transition year ended December 31, 2011 that certain costs of the program would be disallowed. The City was required to re-program an amount equal to the disallowed costs, $515,601, from the City’s own resources and operations.

In addition, documentation supporting the costs of CDBG program’s 2012 expenditures were not available for audit review as said documents were seized by federal law enforcement agencies for confidential investigation. As such, our audits questioned $2,411,226 of combined CDBG and emergency shelter grant expenditures. As of the date of this audit, the City’s liability, if any, cannot be determined. Litigation The City is a defendant in various lawsuits, none of which is unusual for a municipality of its size and should be adequately covered by the City's insurance program, defense program or by the City directly and which may be settled in a manner satisfactory to the financial stability of the City. It is anticipated that any judgments in excess of insured coverage would be paid by the City through future taxation or future debt borrowing. The following litigation was identified for potential of significant exposure to the City: Matter of F.S. v. City - On or about August 10, 2017, the City received a demand for defense by a Police Officer (F.S.) in the matter of United States of America v. F.S., Federal Indictment No. 17-178. The City and the NJIIF took the position that there was no obligation to provide a defense as it was a criminal matter. The Indictment resulted in a hung jury and the U.S. Attorney's Office eventually dismissed the Indictment with prejudice. The Officer has made a demand for reimbursement of attorney's fees and costs in the amount of $820,203 pursuant to N.J.S.A. 40A: 14-155 et seq. The statute would require the City to reimburse F.S.'s legal costs and fees if he can demonstrate that his actions were the result of a mistake or negligence and not borne of an ulterior illegal goal to prevent law enforcement from discovering the true facts and thwart an investigation and possible charges stemming from his conduct or the conduct of the other officers on scene. This would involve retrying the case in a civil forum.

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NOTE T. CONTINGENT LIABILITIES (continued) The City tendered the claim to the NJIIF who have agreed to provide the City with a defense under a reservation of rights. The City is prepared to bring a coverage action against the NJIIF in the event coverage is terminated, including the withdraw of a defense during the course of litigation or denial of indemnification. The City will incur expenses should it be forced to take over the defense and/or litigate a coverage action against the NJIIF. Moreover, if F.S. succeeds in proving his actions did not rise above mere negligence, and the NJIIF prevails in a coverage action, the City may be required to reimburse defense costs to the NJIIF and will incur substantial indemnification costs as well, potentially close to $1,000,000 aggregate. In addition, the City, its officers and employees are defendants in a number of lawsuits including, but not limited to, lawsuits alleging employment discrimination and alleged violations of civil rights. NOTE U. SUBSEQUENT EVENTS Subsequent events have been evaluated through September 5, 2019 the date which the financial statements were available to be issued. Material events are disclosed as follows: Guaranteed Pooled Notes, Series 2019B - On May 24, 2019, the City issued notes through the Hudson County Improvement Authority’s (HCIA’s) County-Guaranteed pooled notes programs as follows, consisting of: $4,321,000 Tax Exempt County Guaranteed Pool Notes Series 2019B-1 maturing May 22, 2020 at an interest rate of 3.0%; and $27,026,000 Federally Taxable County Guaranteed Pool Notes Series 2019B-2A maturing May 22, 2020 at an interest rate of 3.5%. Guaranteed Pooled Notes, Series 2019C – On August 22, 2019, the HCIA received approval from the Local Finance Board for the issuance of additional County Guaranteed Pooled Notes, Series 2019C, which include $6,725,000 of anticipated notes expected to be sold by the City.

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APPENDIX C

FORM OF APPROVING LEGAL OPINION FOR THE BONDS

A PROFESSIONAL CORPORATION ATTORNEYS AT LAW

Riverview Plaza 10 Highway 35

Red Bank, NJ 07701-5902 732-268-8000

FAX 732-345-8420

Haddonfield, NJ | Hackensack, NJ | Princeton, NJ | Philadelphia, PA | Harrisburg, PA | Red Bank, NJ | New York, NY | Wilmington, DE

May 11, 2020

Mayor and Council of the City of Bayonne Bayonne, New Jersey

Ladies and Gentlemen:

We have served as Bond Counsel in connection with the authorization, sale, issuance and delivery of $__________ Federally Taxable General Improvement Bonds, Series 2020 (the “Bonds”) of the City of Bayonne, in the County of Hudson, a body politic and corporate of the State of New Jersey (the “City”). The Bonds are authorized by and are issued pursuant to the provisions of the Local Bond Law, N.J.S.A. 40A:2-1 et seq., as amended and supplemented (the "Local Bond Law"), a bond ordinance duly adopted by the City Council of the City and published as required by law, and a resolution duly adopted by the City Council of the City on April 15, 2020. The Bonds are being issued to permanently finance $27,026,000 of taxable notes of the City issued on May 24, 2019 and maturing on May 22, 2020, previously issued for the payment of certain obligations of the Bayonne Redevelopment Authority. The Bonds are issued in fully registered form, without coupons, initially registered in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), an automated depository for securities and clearing house for securities transactions. One certificate shall be issued for the aggregate principal amount of the Bonds of each series maturing in each year. Purchases of the Bonds will be made in book-entry only form, without certificates, in principal denominations of $5,000 or any integral multiple thereof, except that those Bonds in excess of the largest principal amount thereof not equaling a multiple of $5,000 shall be in denominations of $1,000 or any integral multiple thereof. So long as DTC or its nominee is the registered owner of the Bonds, payments of the principal of and interest on the Bonds will be made by the City as Paying Agent (or a duly appointed Paying Agent) directly to Cede & Co., as nominee for DTC. Disbursal of such payments to the DTC participants is the responsibility of DTC and disbursal of such payments to the beneficial owners of the Bonds is the responsibility of the DTC participants. The Bonds are dated and shall bear interest from their date of delivery, which interest shall be payable semiannually on the first day of February and August (each

C-1

Mayor and Council of the City of Bayonne May 11, 2020 Page 2 an "Interest Payment Date"), commencing February 1, 2021, in each year until maturity or prior redemption, as applicable. The Bonds shall mature on February 1 in each of the years, in the principal amounts and at the interest rates as follows:

Year

Principal Amount

Interest Rate

Year

Principal Amount

Interest Rate

2021 $750,000 2036 $ 750,000 2022 750,000 2037 750,000 2023 750,000 2038 785,000 2024 750,000 2039 825,000 2025 750,000 2040 870,000 2026 750,000 2041 915,000 2027 750,000 2042 965,000 2028 750,000 2043 1,020,000 2029 750,000 2044 1,075,000 2030 750,000 2045 1,135,000 2031 750,000 2046 1,195,000 2032 750,000 2047 1,260,000 2033 750,000 2048 1,335,000 2034 750,000 2049 1,410,000 2035 750,000 2050 1,486,000

The Bonds are subject to optional redemption prior to their stated

maturities.

We have examined such matters of law, certified copies of the proceedings, including all authorization proceedings for the Bonds, and other documents and proofs relative to the issuance and sale of the Bonds as we have deemed necessary or appropriate for the purposes of the opinion rendered below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. As to any facts material to our opinion we have, when relevant facts were not independently established, relied upon the aforesaid instruments, certificates and documents. We are of the opinion that (i) such proceedings and proofs show lawful authority for the issuance and sale of the Bonds pursuant to the New Jersey Statutes, (ii) the Bonds have been duly authorized, executed and delivered and constitute valid and legally binding obligations of the City enforceable in accordance with their terms, and (iii) the City has pledged its full faith and credit for the payment of the principal of and interest on the Bonds, and, unless paid from other sources, all the taxable property within the City

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Mayor and Council of the City of Bayonne May 11, 2020 Page 3 is subject to the levy of ad valorem taxes, without limitation as to rate or amount, for the payment of principal of and interest on the Bonds. In our opinion, under existing law, statutes, regulations, rulings and court decisions interest on the Bonds is includable in the gross income of the owners of the Bonds for Federal income tax purposes. We are also of the opinion that, under existing laws of the State of New Jersey, interest on the Bonds and any gain on the sale thereof is not includable in gross income under the New Jersey Gross Income Tax Act, 1976 N.J. Laws c. 47, as amended and supplemented. Except as stated in the preceding two (2) paragraphs, we express no opinion as to any Federal, state or local tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any Federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof upon the advice or approval of other bond counsel. This opinion is qualified to the extent that the enforceability of the rights or remedies with respect to the Bonds may be limited by bankruptcy, insolvency, debt adjustment, moratorium, reorganization or other similar laws affecting creditors’ rights or remedies heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

We have examined one of the Bonds, as executed by the City, and, in our opinion, the form of such Bond and its execution are regular and proper.

We express no opinion as to any matter not set forth above. The opinions expressed above are being rendered on the basis of federal law and the laws of the State of New Jersey as presently enacted and construed, and we assume no responsibility to advise any party as to changes in fact or law subsequent to the date hereof that may affect the opinions expressed above.

This is only an opinion letter and not a warranty or guaranty of the matters discussed herein.

This letter is being provided for your exclusive benefit pursuant to the requirements of the closing of the Bonds and may not be provided to (except in connection with the preparation of a closing transcript with respect to the Bonds) or relied upon by any other person, party, firm or organization without our prior written consent. Notwithstanding anything to the contrary herein, the undersigned acknowledges that this opinion is a governmental record subject to release under the

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Mayor and Council of the City of Bayonne May 11, 2020 Page 4 New Jersey Open Public Records Act, N.J.S.A. 47:1A-1 et seq., as amended and supplemented.

Very truly yours, ARCHER & GREINER P.C.

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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS

FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS This Continuing Disclosure Certificate dated as of May 11, 2020 (the "Disclosure Certificate") is executed and delivered by the City of Bayonne, in the County of Hudson, State of New Jersey (the "City" or the "Issuer") in connection with the issuance of its $__________ aggregate principal amount of Federally Taxable General Improvement Bonds, Series 2020 (the “Bonds”), all such Bonds being dated May 11, 2020. The Bonds are being issued pursuant to a refunding bond ordinance duly adopted by the City Committee and published as required by law, and a resolution (the "Bond Resolution"), such Bond Resolution being duly adopted by the City Committee on April 15, 2020 . The City covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Beneficial Owners of the Bonds to assist the Underwriter(s) in complying with the Rule (as defined below). The City acknowledges it is an "Obligated Person" under the Rule (as defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Bond Resolution which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for Federal income tax purposes. "Dissemination Agent" shall mean, initially, the City or any Dissemination Agent subsequently designated in writing by the City which has filed with the City a written acceptance of such designation. "EMMA" shall mean the Electronic Municipal Market Access system, a website created by the MSRB and approved by the SEC to provide a central location where investors can obtain municipal bond information including disclosure documents. The City or the Dissemination Agent shall submit disclosure documents to EMMA as a PDF file to www.emma.msrb.org. “Financial Obligation” shall mean a: (a) debt obligation; (b) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b) listed hereinabove. The term “Financial Obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB (as defined below) consistent with the Rule (as defined below).

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"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Rule" shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as the same may be amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. "State" shall mean the State of New Jersey. "Underwriter(s)" shall mean the original underwriter(s) of the Bonds required to comply with the Rule in connection with the purchase of the Bonds. SECTION 3. Provision of Annual Reports. (a) The City shall provide or cause to be provided to the Dissemination Agent not later than 270 days following the end of each year, commencing with the year ending December 31, 2019, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Each Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report; and provided, further, that if the audited financial statements of the City are not available by September 1 of each year, the City shall include unaudited financial statements with its Annual Report and when such audited financial statements become available to the City, the same shall be submitted to the Dissemination Agent no later than thirty (30) days after the receipt of the same by the City. (b) Not later than 285 days following the end of each year, commencing with the year ending December 31, 2019, the Dissemination Agent shall provide to EMMA a copy of the Annual Report received by the Dissemination Agent pursuant to subsection (a) hereof. (c) If the City does not provide or is unable to provide an Annual Report by the applicable date required in subsection (a) above, such that the Dissemination Agent cannot forward the Annual Report to EMMA in accordance with subsection (b) above, the Dissemination Agent shall send a notice of such event to EMMA in substantially the form attached hereto as Exhibit A, with copies to the City (if the Dissemination Agent is not the City). (d) Each year the Dissemination Agent shall file a report with the City (if the Dissemination Agent is not the City), certifying that the Annual Report has been filed with EMMA pursuant to this Disclosure Certificate, and stating the date it was provided.

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(e) If the fiscal year of the City changes, the City shall give written notice of such change to the Dissemination Agent and the Dissemination Agent shall, within five (5) business days after the receipt thereof from the City, forward a notice of such change to EMMA in the manner provided in Section 5(e) hereof. SECTION 4. Content of Annual Reports. (a) The City's Annual Report shall contain or incorporate by reference the following: 1. The audited financial statements of the City (as of December 31). The audited financial statements are to be prepared in accordance with generally accepted auditing standards and audit requirements prescribed by the Division of Local Government Services, State Department of Community Affairs (the "Division") that demonstrate compliance with the modified accrual basis, with certain exceptions, which is a comprehensive basis of accounting other than generally accepted accounting principles (GAAP) and the budget laws of the State. 2. Certain financial information and operating data of the City consisting of (i) the City’s indebtedness, (ii) the City’s most current adopted budget, (iii) the City’s property valuation information, and (iv) the City’s tax rate, levy and collection data, as applicable.. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which the City is an "Obligated Person" (as defined by the Rule), which have been filed with the MSRB, through the EMMA system, or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so incorporated by reference. SECTION 5. Reporting of Significant Events. (a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds, as applicable: 1. Principal and interest payment delinquencies; 2. Nonpayment related defaults, if material; 3. Unscheduled draws on debt service reserves

reflecting financial difficulties; 4. Unscheduled draws on credit enhancements

reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or

their failure to perform;

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6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

7. Modifications to rights of Bondholders, if

material; 8. Bond calls, if material, and tender offers; 9. Defeasances of the Bonds; 10. Release, substitution or sale of property

securing repayment of the Bonds, if material; 11. Rating changes relating to the Bonds; 12. Bankruptcy, insolvency, receivership or similar

event of the City; 13. The consummation of a merger, consolidation,

or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

14. Appointment of a successor or additional trustee

for the Bonds or the change of name of a trustee for the Bonds, if material;

15. Incurrence of a Financial Obligation of the

obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders, if material; and

16. Default, event of acceleration, termination

event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.

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The City shall, in a timely manner not in excess of ten (10) business days after the occurrence of any Listed Event, file a notice of the occurrence of such Listed Event with the MSRB, through the EMMA system, in accordance with the provisions of Section 5 of this Disclosure Certificate. In determining the materiality of any of the Listed Events specified in subsection (a) of this Section 5 that require a materiality determination, the City may, but shall not be required to, rely conclusively on an opinion of counsel. (b) Whenever the City has or obtains knowledge of the occurrence of any of the Listed Events that require a materiality determination, the City shall, as soon as possible, determine if such event would constitute information material, if applicable, to the Beneficial Owners of the Bonds. (c) If the City (i) has or obtains knowledge of the occurrence of any of the Listed Events not requiring a materiality determination, or (ii) determines that the occurrence of a Listed Event requiring a materiality determination would be material to the Beneficial Owners of the Bonds, the City shall promptly notify the Dissemination Agent in writing (if the City is not the Dissemination Agent) and the City shall instruct the Dissemination Agent to report such Listed Event and the Dissemination Agent shall report the occurrence of such Listed Event pursuant to subsection (e) hereof. (d) If the City determines that the occurrence of a Listed Event requiring a materiality determination would not be material to the Beneficial Owners of the Bonds, the City shall promptly notify the Dissemination Agent in writing (if the Dissemination Agent is not the City) and the Dissemination Agent (if the Dissemination Agent is not the City) shall be instructed by the City not to report the occurrence. (e) If the Dissemination Agent has been instructed in writing by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB, through the EMMA system, in a timely manner not in excess of ten (10) business days after the occurrence thereof, with a copy to the City (if the Dissemination Agent is not the City). Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) hereof need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Bondholders of the affected Bonds pursuant to the Bond Resolution. SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds or when the City is no longer an "Obligated Person" (as defined in the Rule). The City shall file a notice of the termination of its reporting obligations pursuant to the provisions hereof with the Dissemination Agent, which notice shall be filed with the MSRB, through the EMMA system, in accordance with the provisions of Section 5(e) hereof. SECTION 7. Compliance with the Rule. Over the past five (5) years, the City of Bayonne has failed to comply with its prior undertakings to provide secondary market disclosure in connection with obligations issued by the City of Bayonne and conduit financings in which the City of Bayonne is an obligated borrower. Specifically, the City of

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Bayonne failed to timely file certain annual financial information and operating data for the years ended December 31, 2014 through 2016. In addition, the City of Bayonne’s unaudited annual financial statement for the year ended December 31, 2017 was timely filed prior to the required submission date, but the audit report for the year ended December 31, 2017 was not approved by the City of Bayonne City Council until its April 17, 2019 meeting. The City of Bayonne also did not promptly file event notices relating to its failure to timely file and certain underlying, insured and enhanced rating changes.

SECTION 8. Dissemination Agent; Compensation. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the City. The City shall compensate the Dissemination Agent (which shall be appointed) for the performance of its obligations hereunder in accordance with an agreed upon fee structure. SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate and any provision of this Disclosure Certificate may be waived, if such amendment or waiver (supported by an opinion of counsel expert in Federal securities laws acceptable to the City to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof) is (a) made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligated person, or type of business conducted; (b) the undertaking, as amended or waived, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the amendment or waiver does not materially impair the interests of holders, as determined either by parties unaffiliated with the City, such determination being supported by an opinion of counsel expert in Federal securities laws, or by the approving vote of a majority of Beneficial Owners of the Bonds at the time of the amendment. The City shall give notice of such amendment or waiver to this Disclosure Certificate to the Dissemination Agent, which notice shall be filed in accordance with the provisions of Section 5 hereof. Notwithstanding the above, the addition of or change in the Dissemination Agent shall not be construed to be an amendment under the provisions hereof. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in the same manner as a Listed Event under Section 5 hereof, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

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SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Holders of at least 25% aggregate principal amount of Outstanding Bonds or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default on the Bonds and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 12. Duties, Immunities and Liabilities of the Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and, to the extent permitted by law, the City agrees to indemnify and hold the Dissemination Agent (if the Dissemination Agent is not the City) and its respective officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's gross negligence or willful misconduct. To the extent permitted by law, the City further releases the Dissemination Agent from any liability for the disclosure of any information required by the Rule and this Disclosure Certificate. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Underwriter(s), and the Beneficial Owners of the Bonds, including Bondholders, and shall create no rights in any other person or entity. SECTION 14. Notices. All notices and submissions required hereunder shall be given to the following, or their successors, by facsimile transmission (with written confirmation of receipt), followed by hard copy sent by certified or registered mail, personal delivery or recognized overnight delivery: (a) If to the City Donna L. Mauer Chief Financial Officer

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City of Bayonne City Hall

630 Avenue C Bayonne, New Jersey 07002 (b) Copies of all notices to the Dissemination Agent from time to time with respect to the Bonds: initially: Ms. Donna L. Mauer Chief Financial Officer City of Bayonne City Hall

630 Avenue C Bayonne, New Jersey 07002 Each party shall give notice from time to time to the other parties, in the manner specified herein, of any change of the identity or address of anyone listed herein. SECTION 15. Counterparts. This Disclosure Certificate may be executed in any number of counterparts which shall be executed by authorized signatories of the City and the Dissemination Agent, as applicable, and all of which together shall be regarded for all purposes as one original and shall constitute and be but one and the same. SECTION 16. Severability. If any one or more of the covenants or agreements in this Disclosure Certificate to be performed on the part of the City and the Dissemination Agent should be contrary to law, then such covenant or covenants, agreement or agreements, shall be deemed severable from the remaining covenants and agreements and shall in no way affect the validity of the other provisions of this Disclosure Certificate.

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SECTION 17. Governing Law. This Disclosure Certificate shall be construed in accordance with and governed by the Laws of the United States of America and the State, as applicable. CITY OF BAYONNE DONNA L. MAUER, Chief Financial Officer Acknowledged and Accepted by: DISSEMINATION AGENT N/A AUTHORIZED SIGNATORY

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EXHIBIT A NOTICE TO MSRB VIA EMMA OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Bayonne, in the County of Hudson, State of New Jersey Name of Bond Issue: $_________ Federally Taxable General Improvement Bonds,

Series 2020 Dated May 11, 2020 (CUSIP Number__________) Date of Issuance: May 11, 2020 NOTICE IS HEREBY GIVEN that the above designated City has not provided an Annual Report with respect to the above-named Bonds as required by the Bond Resolution and a Continuing Disclosure Certificate dated as of May 11, 2020 executed by the City. DATED: DISSEMINATION AGENT (on behalf of the City) cc: City of Bayonne

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